Can Wärtsilä’s 2025 Rally Be Justified by Cash Flows and Earnings Multiples?

• If you are wondering whether Wärtsilä Oyj Abp is still good value after a big run up, you are not alone. This is exactly the kind of stock where the story and the numbers can easily drift apart.
• The share price has climbed about 10.7% over the last week, 16.2% in a month and 80.1% year to date, building on gains of 78.7% over 1 year, 297.7% over 3 years and 325.4% over 5 years.
• Much of this momentum has been tied to Wärtsilä's push into decarbonisation technologies and maritime efficiency solutions, which has sharpened investor focus on the company as a potential transition beneficiary. At the same time, new contracts in energy storage and hybrid marine systems have helped strengthen the narrative that this is no longer just a cyclical engine maker but a platform aligned with structural change.
• Yet despite the excitement, Wärtsilä currently scores just 0/6 on our undervaluation checks. Next, we will unpack what different valuation approaches say about the stock and finish with a more holistic way to think about what it may be worth.

Wärtsilä Oyj Abp scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Wärtsilä Oyj Abp Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth today by projecting its future cash flows and then discounting those back into today’s euros using a required rate of return.

For Wärtsilä, the latest twelve month Free Cash Flow is about €1.21 billion. Analysts provide detailed forecasts for the next few years. Beyond that, Simply Wall St extrapolates the trend to build a ten year cash flow path. Under this 2 Stage Free Cash Flow to Equity model, free cash flow is expected to be around €0.62 billion in 2027, before gradually normalising in later years as growth slows.

When all of those projected cash flows are discounted back and summed, the model arrives at an intrinsic value of roughly €9.97 per share. Compared with the current share price, this implies the stock is about 214.2% above the DCF based fair value, which points to a materially stretched valuation on cash flow fundamentals.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Wärtsilä Oyj Abp may be overvalued by 214.2%. Discover 907 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Wärtsilä Oyj Abp.

Approach 2: Wärtsilä Oyj Abp Price vs Earnings

For profitable companies like Wärtsilä, the Price to Earnings (PE) ratio is a practical way to gauge whether investors are paying a reasonable price for each euro of current earnings. A higher PE can be justified when the market expects faster growth, stronger competitive advantages or lower risk, while slower growth or higher uncertainty generally call for a lower, more modest multiple.

Wärtsilä currently trades on about 30.7x earnings, which is well above both the broader Machinery industry average of roughly 23.6x and the peer group average of around 21.5x. Simply Wall St also calculates a proprietary Fair Ratio of about 23.4x for Wärtsilä, which estimates what a normal PE might look like after accounting for its earnings growth outlook, profitability, risk profile, industry and market capitalisation.

This Fair Ratio is more tailored than a simple industry or peer comparison because it adjusts for the fact that not all machinery businesses have the same margins, growth prospects or balance sheet strength. With the current PE of 30.7x sitting noticeably above the Fair Ratio of 23.4x, the multiple based view reinforces the idea that the shares are pricing in a lot of good news already.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1446 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Wärtsilä Oyj Abp Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework where you write the story you believe about a company and connect it directly to the numbers behind its fair value, such as future revenue, earnings and margins.

A Narrative on Simply Wall St’s Community page lets you spell out why you think Wärtsilä will succeed or struggle, then link that story to a structured financial forecast and an explicit fair value estimate, all inside an easy, guided tool used by millions of investors.

Once your Narrative is set up, the platform automatically compares your fair value to the current share price to help you evaluate whether Wärtsilä looks attractive, fairly priced or unattractive, and keeps that view up to date as new earnings, news and other data points flow in so your thesis evolves with the facts.

For example, one investor might build a cautious Narrative that sees fair value closer to €13, while another, more optimistic Narrative could support a value around €26. By making those assumptions and outcomes explicit, Narratives show exactly why informed investors can disagree and what would need to change for you to revisit your decision.

Do you think there's more to the story for Wärtsilä Oyj Abp? Head over to our Community to see what others are saying!

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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