This would be great, the new CEO could “step on the gas” a little harder. The company doesn’t need any revolution or change of direction, more like fine-tuning.
I also think that the measurement market in general could be a faster-growing sector in the future than it has been so far – simply because nowadays more and more data is needed, which can then be analyzed (both in real-time and later). This requires measurement tools, and the demands for their quality are constantly increasing.
I agree, there would be expansion opportunities in the area of industrial measurements.
In the area of industrial measurements, market growth varies by 5-10% across product areas, and market shares range between 10-25%, with power generation measurements being under 10%.
Another thought that came to mind is that it would be challenging for the company to manage a large number of different products and their product development. Inderes’ company report 9/2019 stated the following on the subject (p. 9).
“The company’s business model has its challenges. The company’s revenue comes from a large number of different products, the role of product development is very high, demand is fragmented into several small market segments and a wide geographical area.”
Bolder expansion would require even more investment in product development and marketing. This would then weigh on profitability in the short term, but growth would accelerate this way. In terms of sales, additional investments have already been made, e.g., establishing an online store and new distributor agreements.
Regarding Vaisala’s ESG theme, I noticed an article from last week where the portfolio manager of Nordea’s new Innovation Stars fund evaluated Vaisala.
https://nordeafundsmagazine.fi/artikkelit/vaisala
Nordea’s analysts’ expectations:
Vaisala’s share in the Innovation Stars fund is currently 2.46%. The fund was established on June 22, 2020. Information about the fund: Rahastot Nyt | Kaikki rahastot ja rahastokurssit | Nordea
I haven’t closely followed Vaisala’s acquisitions in recent years, and I have no idea what the Foreca deal included. However, considering Foreca and Vaisala’s weather-related portfolio, the deal sounded pretty good to me (assuming it strengthened Vaisala’s digital expertise).
Otherwise, I’ve been a bit disappointed with Vaisala’s slow pace of acquisitions (or rather, growth rate). Investments have seemingly been made mainly in a few small AI-side companies. Could these have had some genuinely valuable software that can be integrated into Vaisala’s road measurement devices? Otherwise, I don’t quite understand why money would be burned on a company whose greatest value is likely its employees.
Every now and then, I’ve wondered if it would be worth considering entering a new segment by acquiring a company that already has a finished product and position? This, of course, doesn’t fit Vaisala’s style, and a successful thermal camera startup would probably cost a lot compared to in-house product development. This makes the situation a bit tricky, in my opinion, when the approach is to do everything in-house with a small team. Quality remains high, but at some point, the cleanroom and other capacities will inevitably run out, won’t they?
Fortunately, I added Vaisala to my portfolio during the corona dip. Currently, the price is so high again that I wouldn’t dare invest in such a slow-moving company, even if it is Finland’s highest quality.
Edit. While writing this, it occurred to me that Vaisala apparently has lidar technology. If only that business could be expanded beyond cloud(?) measurements. Or is the difference too great compared to the laser measurements of car companies and, for example, Trimble, making suitability an issue?
Regarding acquisitions, it can be stated that they should not be made just for the joy of doing them or even for growth. A large portion of acquisitions destroy shareholder value. The problem with acquisitions is that the seller knows their company better than the buyer, and thus the buyer has an information disadvantage. Additionally, integrating large acquisitions takes a lot of time and effort.
Therefore, organic growth and small, well-targeted acquisitions are an excellent way to grow. Organic growth is somewhat undervalued today, even though it is usually the most profitable and surest way to grow profitably.
The best scenario would probably be for the new CEO to dare to accelerate internal growth and, if necessary, further increase product development and ensure that the entire organization is capable of a faster growth rate than before. On top of that, precisely targeted small acquisitions for suitable complementary growth segments (integrating small companies or technology transfer is simpler than large ones), it is entirely possible to grow profitably significantly faster than the market. There are indeed growth opportunities, perhaps the company has been accustomed to somewhat too modest growth.
Over 7% increase today, is there any specific reason or just a general rise?
There was actually an article about this recruitment process in KL Fakta. The process was described quite openly.
I also noticed that KL article (behind a paywall). Information about these recruitments is rarely given, great transparency. I’ll refer to the article in my own words a bit:
What’s driving Vaisala; over 4% today, but no actual news or reason? I couldn’t find anything from the company’s announcements or the media that I could connect to it.
So today we’re rushing this:
Let’s also add the updated guidance to the thread.
Vaisala’s preliminary figures for Q1-Q3/2020:
January-September 2020: preliminary net sales 273 M
January-September 2020: preliminary operating profit (EBIT): 33 M
The company narrowed its 2020 net sales forecast and raised its operating profit forecast. The guidance still has wide ranges.
| Previous guidance | New guidance | ||
| Net sales | 370─405 M | 370─390 M | |
| Operating profit (EBIT) | 34─46 M | 40─48 M | |
Vaisala released a new video yesterday. New CEO Kai Öistämö has started at Vaisala.
“As new President and CEO, I look forward to building upon the company’s strong foundation and technology expertise.”
Inderes just released a company update with a SELL recommendation. According to them, the company is very high quality but far too expensive. (The report is based on the latest figures). So the SELL recommendation is purely based on too high a valuation level; the company itself is in good shape.
Has anyone else looked into this report? What do you think? For me, this doesn’t cause any action in one direction or another.
Today, the Q3 interim report will be released at 2:00 PM. I think releasing the interim report while the stock exchange is open is a bad practice; it would be better to publish it in the morning before the market opens, or preferably in the evening right after the market closes. That way, investors would have time to calmly familiarize themselves with it. I don’t understand why Vaisala doesn’t do it this way.
The interim report has been published (see link below)
I’m not going to start digging into the figures yet – let’s wait for management’s comments at the press conference, and then Inderes will probably issue their own comments. Then I’ll have to give it some thought. The financial guidance remained the same as announced on October 21st, i.e.: “Vaisala estimates its 2020 net sales to be between EUR 370–390 million and its operating result (EBIT) to be between EUR 40–48 million.”
A high-quality company, and the quality is reflected in its valuation level. I’ve held it in my portfolio for a long time, and the surging valuation doesn’t prompt any action. In fact, only if it were to dip due to short-term, external difficulties would it trigger an additional purchase. I’m not selling—it’s one of those rare, un-monitorable evergreen treasures in the portfolio.
Agreed, I only recently bought it, hopefully the company stays high quality in the future so I can own it for a long time.
Did anyone watch the press conference? I didn’t get to watch what was said there, was there anything other than just the presentation of those figures…
I listened to the Q3 audiocast. Nothing significantly new, but a few observations:
OP’s Kim Gorschelnik’s short comments on the results => www.youtube.com/watch?v=ZrHxAXXOxkU
I doubt its possibilities. As I understand it, quite a few products, from industrial transformer meters to weather radars, require high-caliber expert/specialist knowledge for installation, meaning they are quite far from plug-and-play type meters that can simply be plugged into a wall. Especially when one starts to consider locations in South America and Africa, not to mention small island nations, it might be that the necessary expertise is not easily available. Of course, perhaps through development work, products can always be made a little more user-friendly and data pipelines can be built to get device data to Finland (and perhaps some configurations/updates could be run remotely) instead of having to send Finnish guys to hike in the middle of a jungle and do manual labor.
Anyway, I sold my Vaisalas a while ago, as the price seemed quite high. Unlike Google and Amazon, Vaisala’s growth rate seems somewhat limited, so no matter how high-quality and safe the company is, the return expectation will inevitably remain somewhat limited. I certainly hope I’m wrong. If the price could be lowered a bit due to corona or perhaps soft guidance, I will definitely jump back in immediately. Until then, I’ll try my luck with riskier stocks. It would be far too boring to get rich with “easy” stocks like Kone, Elisa, and Vaisala.
Agreed, not everything works with remote connections.
For slow-growing quality companies, there has been a somewhat twofold development. For example, Kesko has continued to develop well, but Elisa, for example, has now fallen quite close to the bottom of the March corona dip (€42.13).
Selling Vaisala might be a good move, as growth companies still seem to interest the markets. For Vaisala, a price drop like Elisa’s has not yet occurred, even though analysts’ forecasts indeed show limited return expectations.
I wouldn’t really consider Vaisala a bond stock, but last week Arvopaperi and Kauppalehti published an article discussing whether Vaisala, Sampo, Orion, UPM-Kymmene, and Fortum, for example, could be the next bond stocks on the Helsinki Stock Exchange. According to the article, Vaisala has provided stable dividend yield and, in recent years, also share price appreciation to its owners, and is a top company in its own limited field, currently achieving top results.
It remains to be seen how steadily the results will develop in a more unstable market situation, as projects can easily be postponed to a later date.
Joni commenting on Vaisala: Vaisala: Poikkeuksellisia ilmoja - Inderes
This left me with a specific thought:
As Vaisala is a financially sound company led with a long-term vision, they have continued their large investments despite the crisis. This is what they need to do, as Joni commented, to stay at the top, or “to maintain their high value chain position.” This is possible in such uncertain times thanks to their financial strength.
What is the situation of Vaisala’s competitors? It’s quite a broad group of companies, but are they able to do the same in this situation, i.e., continue full-speed product development? Could Vaisala gain a step ahead due to the crisis if competitors suffer from a lack of cash or courage and put investments on hold? Could it also open up acquisition opportunities for Vaisala? I believe that in such crises, the long-term winners will be companies with strong cash flow that, instead of becoming paralyzed, are able to advance more steadily in the competitive landscape, even if their own order books temporarily empty.
