Ørsted (CPSE:ORSTED) has just brought the 913 MW Borkum Riffgrund 3 offshore wind farm into commercial operation in Germany, a sizeable step in its 8.1 GW construction programme and long-term renewables plan.
These commissioning headlines for Ørsted come alongside a share price of DKK139.8, with a 1 day share price return of 1.97% and year to date share price return of 9.22%. That sits against a 1 year total shareholder return of 24.09%, although the 3 year and 5 year total shareholder returns are down 34.53% and 72.43% respectively. This suggests recent momentum has picked up after a much tougher longer term period as investors reassess growth prospects and risks around large offshore projects like Borkum Riffgrund 3.
Scan beyond Ørsted and compare this commissioning story with other listed utilities pushing large-scale energy projects using our hand picked 39 power grid technology and infrastructure stocks
Ørsted now trades at a sizeable discount to both analyst targets and estimated fair value after this commissioning win. Is the market applying sensible caution to a loss-making utility, or underpricing the progress already in the ground?
Price to Sales of 2.2x: Is it justified?
On a P/S basis, Ørsted trades at 2.2x sales, which screens as good value compared to both its own peer group and the wider European renewable energy sector.
The P/S ratio compares the company’s market value to its revenue and is often used for utilities and renewables where earnings can swing with project write downs and heavy investment. For Ørsted, current revenue of DKK83,672.0m sits against a market cap of DKK184.7b, which underpins that 2.2x multiple.
Simply Wall St’s checks flag Ørsted as good value on P/S relative to a peer average of 15.1x and to the European renewable energy industry average of 2.6x. That is a sizeable gap, which indicates the market price reflects more cautious expectations for future profitability and cash generation than for many listed renewable utilities.
Result: Price-to-Sales of 2.2x
See what the numbers say about this price, find out in our valuation breakdown See what the numbers say about this price — find out in our valuation breakdown.
However, Ørsted still carries risks, including recent total returns over 3 and 5 years that are down sharply, as well as ongoing net losses of DKK3,118.0m.
Find out about the key risks to this Ørsted narrative.
Another view on Ørsted’s value
There is a second lens on Ørsted. The SWS DCF model estimates fair value at DKK256.82 per share, while the market price is DKK139.8. That points to the stock trading at a large discount. Is this a genuine gap, or does it simply reflect the risk of loss-making projects?
For investors who want to see how that model works step by step, 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 253 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
With Ørsted presenting both clear progress and ongoing uncertainties, it makes sense to check the data firsthand and decide how you feel about the balance of risk and reward. To weigh those positives against the concerns in a structured way, start with 3 key rewards and 1 important warning sign
Looking for more investment ideas beyond Ørsted?
If Ørsted has sharpened your interest in renewables and utilities, do not stop here. Broaden your watchlist now or risk missing other compelling opportunities.
- Spot potential value movers early and review the 253 high quality undervalued stocks that combine solid fundamentals with appealing pricing.
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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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