WRT1V Shares Will Likely Underperform As Cycle Peaks Despite Higher Street Optimism

Wärtsilä Oyj Abp's analyst-derived fair value estimate edged up slightly to EUR 23.45 from EUR 23.39, as analysts lifted their price targets across the Street on improved margin outlook and modestly higher long term earnings expectations, despite some tempering of revenue growth assumptions.

Analyst Commentary

Analysts remain divided on Wärtsilä Oyj Abp, with recent target price increases reflecting better confidence in execution and earnings quality, but ratings that continue to signal caution on valuation and cyclical risk.

Bullish Takeaways

• Bullish analysts have raised target prices into the low to mid EUR 20s, indicating improved conviction that earnings momentum and margin resilience can support a higher fair value range.
• Higher targets are tied to better visibility on medium term earnings, with expectations that profitability gains in core businesses can be sustained even if top line growth moderates.
• Some see the current share price still discounting execution risk, suggesting scope for further rerating if Wärtsilä delivers consistently on cost discipline and project delivery.
• Neutral stances such as Equal Weight and Hold, despite upward target revisions, reflect a view that downside risks have eased and that the risk reward profile has shifted closer to balanced.

Bearish Takeaways

• Bearish analysts continue to flag valuation as stretched relative to their more conservative growth and margin assumptions, maintaining Sell or Underweight ratings despite modest target hikes.
• There is concern that the current cycle may already be well reflected in the share price, which could limit upside if revenue growth slows faster than anticipated.
• Some caution that execution risk in large, long dated projects could pressure margins and cash conversion, which would challenge the higher end of fair value estimates.
• Overall, the persistence of negative or cautious ratings, even after target upgrades, underscores skepticism that Wärtsilä can fully close the gap between Street optimism and its longer term structural challenges.

What's in the News

• Completed share buyback program with a total of 1,000,000 shares repurchased, representing 0.17% of shares outstanding for €18.15 million under the mandate announced on April 28, 2025 (company buyback tranche update)

Valuation Changes

• The fair value estimate has risen slightly to €23.45 from €23.39, reflecting a modest upward revision in the analyst-derived central valuation.
• The discount rate has increased marginally to 7.08% from 7.03%, implying a slightly higher required return in the valuation framework.
• The revenue growth assumption has fallen moderately to 5.90% from 6.73%, indicating more conservative top-line expectations over the forecast period.
• The net profit margin has increased slightly to 9.10% from 8.90%, signaling a modestly stronger profitability outlook despite softer revenue growth assumptions.
• The future P/E multiple has ticked up marginally to 23.1x from 23.0x, suggesting a slightly higher implied valuation multiple on forward earnings.