Fortum Oyj
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Intrinsic Value
The intrinsic value of one FORTUM stock under the Base Case scenario is 11.607 EUR. Compared to the current market price of 13.745 EUR, Fortum Oyj is Overvalued by 16%.
The Intrinsic Value is calculated as the average of DCF and Relative values:
Valuation Backtest
Fortum Oyj
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Fundamental Analysis
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Once a regional powerhouse in the Nordic energy sector, Fortum Oyj has evolved into a significant player in the transition to sustainable energy. Founded in 1998 and headquartered in Espoo, Finland, the company has built a formidable portfolio encompassing electricity generation, heat, and related services across Europe and Asia. With a strong focus on sustainability, Fortum has made considerable investments in renewable energy sources, particularly hydropower, wind, and solar, positioning itself as a leader in the shift towards greener alternatives. This strategic pivot reflects not just a response to global climate challenges but also an opportunity to capitalize on growing demand for clea...
Once a regional powerhouse in the Nordic energy sector, Fortum Oyj has evolved into a significant player in the transition to sustainable energy. Founded in 1998 and headquartered in Espoo, Finland, the company has built a formidable portfolio encompassing electricity generation, heat, and related services across Europe and Asia. With a strong focus on sustainability, Fortum has made considerable investments in renewable energy sources, particularly hydropower, wind, and solar, positioning itself as a leader in the shift towards greener alternatives. This strategic pivot reflects not just a response to global climate challenges but also an opportunity to capitalize on growing demand for clean energy solutions, appealing to environmentally conscious investors.
As a publicly traded entity on the Helsinki Stock Exchange, Fortum presents an attractive investment opportunity driven by its commitment to innovation and efficiency. The company’s emphasis on operational excellence translates into stable financial performance, underscored by strong cash flows and a robust balance sheet. Furthermore, Fortum’s collaboration with its subsidiary, Uniper, broadens its market reach and diversifies its energy portfolio while enhancing its competitive edge in the European energy landscape. Investors looking for a blend of solid returns and social responsibility can find a promising opportunity in Fortum, as it continues to pave the way for a sustainable energy future while delivering value to its shareholders.
Fortum Oyj is a Finnish energy company primarily engaged in the generation and sale of electricity and heat. The company operates in several core business segments, which can be summarized as follows:
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Power Generation: Fortum generates electricity from various sources, including nuclear, hydro, and thermal power plants. This segment focuses on efficient energy production while ensuring sustainability and compliance with environmental regulations.
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Renewable Energy: This segment emphasizes Fortum’s commitment to environmental sustainability. The company invests in and operates renewable energy sources such as wind and solar power, aiming to increase its share of low-emission and renewable energy in its portfolio.
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Distribution: Fortum is involved in the distribution of electricity and heat. The company operates power distribution networks and supplies heat to urban areas. This segment includes investments in infrastructure to enhance grid reliability and integrate renewable energy sources.
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Consumer Solutions: Fortum offers a range of services to residential and business customers, including electricity sales, energy efficiency solutions, and electric vehicle charging solutions. This segment focuses on enhancing customer experience and promoting energy conservation.
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Market Operations: The company participates in energy trading, managing wholesale market operations, and balancing energy supply and demand. This includes trading in various energy markets and developing financial products related to energy.
Overall, Fortum Oyj’s core business segments reflect its strategic focus on sustainable energy solutions, innovation in renewable technologies, and efficient energy distribution and consumer engagement.
Fortum Oyj, a Finnish energy company, has several competitive advantages that help it stand out in the energy sector:
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Diverse Energy Portfolio: Fortum's operations span various segments, including nuclear, hydroelectric, and renewable energy. This diversification mitigates risks and enhances resiliency against fluctuations in energy prices or regulatory changes.
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Strong Position in the Nordic Market: Fortum has a substantial presence in the Nordic energy market, where it benefits from a strong regulatory framework supporting renewable energy and sustainability. Its established relationships and market knowledge provide a competitive edge.
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Sustainability Commitment: Fortum has a clear focus on sustainability and reducing carbon emissions. Its investments in renewable energy sources align with global trends towards decarbonization, attracting socially-conscious investors and customers.
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Innovative Technology and R&D: The company invests in new technologies, such as energy storage solutions and digitalization initiatives, which enhance operational efficiency and customer engagement, enabling it to stay ahead of competitors.
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Strategic Partnerships and Alliances: Fortum has formed strategic alliances, such as its collaboration with other energy firms and local governments, which expand its capabilities and market reach.
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Robust Financial Performance: Fortum's consistent financial performance and strong credit ratings allow it to access capital at favorable rates, supporting its growth and investment strategies while providing stability in uncertain times.
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Vertical Integration: Fortum’s involvement in various stages of the energy value chain, from generation to distribution and sales, helps the company control costs and maintain margins better than many rivals who may only focus on one segment.
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Regulatory Support: As an established player operating in compliant markets and aligned with EU policies promoting green energy, Fortum enjoys favorable regulatory conditions that can be harder for smaller competitors to navigate.
Each of these advantages positions Fortum favorably within the competitive landscape, allowing it to adapt and thrive amidst changing market dynamics.
Fortum Oyj, a Finnish energy company, faces several risks and challenges as it navigates the evolving energy landscape. Some key risks and challenges include:
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Regulatory Changes: The energy sector is heavily regulated, and changes in government policies or regulations regarding emissions, renewable energy subsidies, and nuclear power can significantly impact Fortum's operations and profitability.
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Market Volatility: Fluctuations in energy prices can affect revenue streams. The ongoing transition to renewable energy sources may lead to increased volatility in electricity prices, which could challenge Fortum's traditional business model.
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Transition to Renewable Energy: While Fortum has made commitments to transition toward cleaner energy, the pace of this transition can be hindered by technological challenges, investment costs, and competition from other energy sources.
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Competition: The energy market is becoming increasingly competitive, with new entrants focusing on renewable technologies. Fortum needs to maintain its market position amidst aggressive competition from both established players and new renewable energy companies.
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Climate Change Risks: As a player in the energy sector, Fortum faces risks related to climate change, both from physical impacts like extreme weather events that can affect infrastructure and from increased social and regulatory pressures for emissions reductions.
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Operational Risks: Fortum operates power plants and related infrastructure that are subject to operational failures, maintenance issues, and safety incidents, which can lead to significant financial and reputational damage.
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Technological Disruptions: The rapid pace of technological advancements in energy generation, storage, and efficiency can pose risks to Fortum if the company fails to keep up or adapt its offerings.
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Financing and Investment Risks: As Fortum invests in new energy projects and technologies, it faces risks related to securing financing, managing costs, and achieving expected returns on investment.
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Public Perception and Stakeholder Activism: Increasing public awareness and activism regarding environmental issues can pose reputational risks for Fortum, influencing public opinion and potentially leading to customer attrition if the company is perceived as not doing enough to address sustainability concerns.
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Geopolitical Risks: Fortum operates in multiple countries, and geopolitical tensions, particularly in Europe, can lead to market uncertainties, regulatory challenges, and potential disruptions in operations or access to resources.
Navigating these risks requires strategic planning and a proactive approach to risk management, as well as a commitment to sustainability and innovation to maintain competitiveness in the energy sector.
Revenue & Expenses Breakdown
Fortum Oyj
Balance Sheet Decomposition
Fortum Oyj
Current Assets | 6.4B |
Cash & Short-Term Investments | 4.1B |
Receivables | 1.5B |
Other Current Assets | 853m |
Non-Current Assets | 11.4B |
Long-Term Investments | 2.3B |
PP&E | 6.6B |
Intangibles | 619m |
Other Non-Current Assets | 1.9B |
Current Liabilities | 2.4B |
Accounts Payable | 1.2B |
Short-Term Debt | 384m |
Other Current Liabilities | 729m |
Non-Current Liabilities | 7B |
Long-Term Debt | 4.8B |
Other Non-Current Liabilities | 2.1B |
Earnings Waterfall
Fortum Oyj
Revenue
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6.3B
EUR
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Cost of Revenue
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-3.6B
EUR
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Gross Profit
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2.7B
EUR
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Operating Expenses
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-1.4B
EUR
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Operating Income
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1.3B
EUR
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Other Expenses
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-61m
EUR
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Net Income
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1.3B
EUR
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Free Cash Flow Analysis
Fortum Oyj
EUR | |
Free Cash Flow | EUR |
Fortum faced a challenging first quarter in 2024 with a decline in comparable EBITDA to EUR 622 million and operating profit to EUR 530 million, attributed primarily to lower spot and hedge prices. Despite these setbacks, the company saw an increase in net cash from operating activities to EUR 538 million due to favorable changes in working capital. The Consumer Solutions segment showed recovery with improved electricity sales margins. The company continues to invest in clean energy, shutting down its last coal unit in Espoo and advancing the Pjelax wind farm. Fortum maintains an annual optimization premium guidance of EUR 6-8 per MWh, despite a strong double-digit figure this quarter.
What is Earnings Call?
FORTUM Profitability Score
Profitability Due Diligence
Fortum Oyj's profitability score is 32/100. The higher the profitability score, the more profitable the company is.
Score
Fortum Oyj's profitability score is 32/100. The higher the profitability score, the more profitable the company is.
FORTUM Solvency Score
Solvency Due Diligence
Fortum Oyj's solvency score is 50/100. The higher the solvency score, the more solvent the company is.
Score
Fortum Oyj's solvency score is 50/100. The higher the solvency score, the more solvent the company is.
Wall St
Price Targets
FORTUM Price Targets Summary
Fortum Oyj
According to Wall Street analysts, the average 1-year price target for FORTUM is 14.205 EUR with a low forecast of 11.11 EUR and a high forecast of 17.85 EUR.
Dividends
Current shareholder yield for FORTUM is .
Shareholder yield represents the total return a company provides to its shareholders, calculated as the sum of dividend yield, buyback yield, and debt paydown yield. What is shareholder yield?
Profile
Country
Industry
Market Cap
Dividend Yield
Description
Fortum Oyj engages in the generation, distribution, and sale of electricity and heat, as well as operation and maintenance of power plants. The company is headquartered in Espoo, Etela-Suomen and currently employs 19,260 full-time employees. The firm provides its customers with electricity, gas, heating and cooling services. Its reportable segments are Generation, Russia, City Solutions, Consumer Solutions and Uniper. The Generation segment comprises nuclear, hydro, wind, and thermal power generation, as well as power portfolio optimisation, trading, industrial intelligence, and global nuclear services. The Russia segment comprises power and heat generation and sales in Russia. The City Solutions is responsible for sustainable solutions for urban areas and comprises heating, cooling. The Consumer Solutions is responsible for the electricity and gas retail businesses in the Nordics, Poland and Spain, including the customer service and invoicing businesses and The Uniper segment, where Uniper is an international energy company and its business is the secure provision of energy and related services in Europe and Russia. The firm operates worldwide.
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The intrinsic value of one FORTUM stock under the Base Case scenario is 11.607 EUR.
Compared to the current market price of 13.745 EUR, Fortum Oyj is Overvalued by 16%.