Analysis of Vestas

Company: Vestas Wind Systems AS


Business: A Danish wind power company that started back in 1979. They have three business units: Advanced wind turbine technology, Efficient manufacturing of wind turbines and Sale and service of wind power plants. Most likely the final one will grow more and more for each year and will in the end become the most lucrative part of their business but that will for sure last some more years until you get a nice business from exchange of parts and service contracts of the wind mills.

Active: They claim to be global by saying that they have installed wind turbines in more than 70 countries. (Has sold and installed 48,950 wind turbines or 55,370 MW globally as per 31 December 2012)

P/E: -2.8

The P/E for Vestas is due to losses in the last (also in 2011!) negative with -2.8 the P/B is also fairly high with 1.7 but not too bad. So for Graham it would be a no go. The earnings to sales are -13% so bad, bad. The book to debt is 0.3 which is also not very impressive. The growth has been 3.6% per year which is in my opinion not so great for a "small" company that have a big space to expand into. The motivated P/E would be around 12-15 for this fingers crossed turnaround company. They do spend some money on R&D which is a must for a company such as this! they pay no dividends which is fully understandable due to their two year of losses and adding to that the fact that they want to expand fast and quickly then one can forget about dividends. All the cash must be pushed back into the company.

Conclusion: I would not risk to invest in Vestas today. I do however see that in the future especially with a growing service and maintenance part they will do well but I want to see that in the financial figures before stepping in. Maybe it would be enough that one or two of the competitors fall away for them to start showing better numbers but some of those competitors are seriously big (ex. Siemens in Germany).