Ørsted (CPSE:ORSTED): Examining Valuation Following Steep Share Price Decline

Ørsted (CPSE:ORSTED) shares have seen varied performance lately, with modest gains this week but losses over the past month and three months. Investors might be weighing the company’s fundamentals in comparison to recent market trends.

See our latest analysis for Ørsted.

Looking at the bigger picture, Ørsted’s share price has struggled, with short-term gains doing little to offset a year-to-date decline of 65%. Its one-year total shareholder return is down 44%. This fading momentum may signal the market’s shifting risk appetite or concerns around growth ahead.

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With such a steep decline in Ørsted’s share price and a price still below analyst targets, is this a genuine buying opportunity for contrarian investors, or is the market already reflecting weaker growth prospects ahead?

Price-to-Sales of 2.2x: Is it justified?

Ørsted’s stock is trading at a price-to-sales ratio of 2.2x, which stands out as a relative bargain compared to the peer average and industry benchmarks. At the last close of DKK117.55, this multiple gives investors reason to question whether the current price already reflects more pessimistic growth assumptions than its rivals.

The price-to-sales ratio compares the company’s market value to its annual sales and is a useful measure for revenue-focused businesses, especially those with volatile or negative earnings. For Ørsted, this is particularly relevant as the company is currently unprofitable, so traditional price-to-earnings metrics do not apply.

Ørsted’s price-to-sales of 2.2x is lower than both the peer group average of 4.5x and the European Renewable Energy industry average of 2.4x. This suggests the market is placing less value on each krone of Ørsted’s revenue than its competitors, indicating a level of caution or skepticism about its revenue quality or future growth. If market sentiment changes or performance improves, there is potential for the valuation multiple to move closer to industry norms.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Sales of 2.2x (UNDERVALUED)

However, there are still risk factors, such as ongoing unprofitability and recent steep share declines. These could challenge any emerging bullish narrative for Ørsted.

Find out about the key risks to this Ørsted narrative.

Another View: DCF Model Perspective

While the price-to-sales ratio suggests Ørsted looks cheap relative to its peers, our DCF model provides a different angle. According to the SWS DCF model, Ørsted is actually trading above its estimated fair value. This implies the shares may be overvalued based on intrinsic cash flows. So, which signal should investors trust?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Ørsted for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 870 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Ørsted Narrative

If you want to test your own reasoning, you can easily build a personalized view from the raw data in just a few minutes. Do it your way

A great starting point for your Ørsted research is our analysis highlighting 1 key reward and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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