Wartsila Looks Undervalued, But The Sailing Is Anything But Smooth

I wasn’t bullish on Wartsila (OTCPK:WRTBF) (OTCPK:WRTBY) (WRT1V.HE) back in early 2019 due to the company’s poor record of hitting margin targets and uncertainty in the outlook for marine orders. Those issues have remained very much in play, and the shares were down about a third even before the Covid-19 crisis hit the shares, as sell-side expectations headed steadily lower.

The situation today is a little different. While the outlook for the marine business is pretty poor in the short term, a lot has already been wrung out of the shares, and I think the cruise ship industry will eventually recover. Likewise, I see an ongoing need for the company’s flexible power generation systems even as the world adopts more renewable energy sources. If Wartsila can manage just 2% revenue growth from a point of 20-year lows for new ship orders and roughly steady margins, these shares could offer double-digit returns from here.

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Wartsila Looks Undervalued, But The Sailing Is Anything But Smooth