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I always try to look at companies that are mission-critical and have potential long-term tailwinds while being (somewhat) overlooked. I have not found many analyses on Wärtsilä, yet it does look appealing for the kind of companies I look at.
Wärtsilä is a company that effectively acts as the key player in global maritime trade and the electrical grid. They are an "industrial" company that makes giant engines, but they have become a high-tech service and software business that solves the "instability problem" of the 21st century (their term).
If Wärtsilä's engine on a cargo ship in the middle of the ocean, or if one of their power plants goes offline, the consequences are catastrophic, both financially and logistically. This creates an incredible level of trust; as of mid-2026, customers are so reliant on Wärtsilä that they have essentially pre-funded the company’s growth, providing over a billion euros in advance payments. This allows the company to operate without debt and with a "fortress" balance sheet that most industrials would envy.
The competitive moat here is built on a (very) long-term contract. When a shipowner or a utility company installs Wärtsilä hardware, they are locked into a three-decade ecosystem. You can’t just swap out a massive engine mid-voyage or hire a random mechanic to fix a proprietary system. So today, more than half of the company's revenue now comes from high-margin services and software. This moat is being widened by the shift to green energy. As shipping regulations tighten, Wärtsilä is the only player offering engines that are "future-proof"—capable of running on hydrogen, ammonia, or methanol. They aren't just selling engines; they are selling a license to stay in business in a decarbonising world.
It is not a maturing company. Wärtsilä is pivoting into the "Energy Balancing" and "AI Data Center" markets. As we add more wind and solar power to the grid, the energy supply becomes intermittent. Wärtsilä’s engines are the "insurance policy" because they can ramp up to full power in just two minutes when the wind stops blowing. Simultaneously, AI data centers—which require massive, uninterrupted power—are becoming a huge growth driver. In early 2026 alone, they booked record-breaking orders for data centre power plants because their technology is actually more cost-effective than traditional gas turbines for these specific needs.
Ofc, they are not without competition, but they are niche and specialised enough. Like GE Vernova in the power sector. But they focus on gas turbines. These are massive machines designed to provide baseload power for entire cities. Wärtsilä, by contrast, focuses on reciprocating engines (smaller, modular units).
Or MAN Energy Solutions. They win in scale, but Wartsilia distinguished enough by pioneering in "Future Fuels" (like Ammonia and Hydrogen) and has a more integrated digital software suite.
Last semi-annual report in July confirmed a lot of the bullish story: The company is currently generating a return on its capital of over 70%. Because they have roughly €1.7 billion in net cash and a record-breaking order book of nearly €9 billion, they are in a position where they don't need to borrow money to expand. They are effectively a self-funding growth machine.
Today, they are not undervalued (sorry). However, given the nature of their work and the effectiveness of their business, they are also not crazy overvalued. In fact, at 30e, I'd say they are at the lower end of fair value (which is always interesting for quality companies).
I used a 9% WACC and 5-8% organic growth to do my DCF (which I think is relatively conservative). At 30 euros, you can expect a solid annual return of about 11–13% based on their organic growth (they have over 40% in total order intake, and over 5% in net sales, which is normal since many of the 2026 orders will only materialise in 2028-30) and dividends. However, if the price were to dip under 27e, it would represent an appealing opportunity to buy a world-class franchise at a discount. I am itching to buy, but have set an alert at 27e.
What do you think? Had you heard of them before? Does the company interest you?