Volvo May Take A Hit In 2025, But Investors Can Still Come Out Ahead
Unlevered DCF valuation + spreadsheet
Volvo A.B. faces stagnation in Europe and declining U.S. orders, but remains a valid investment despite a predicted downturn in 2025.
The company's 6.6% dividend yield may be unsustainable, with free cash flows insufficient to cover the special portion of dividends, necessitating potential financing or dividend reduction.
Despite the increase in leverage, Volvo has a healthy capital structure with some additional debt capacity.
I expect Volvo's revenue to grow to SEK 510.5B in 2025, up to SEK 590B by 2029, with a gradual decline to SEK 530B by 2034.
Volvo's stable cash flows indicate an intrinsic value around $42B, though investors should be prepared for multiple capital deployments before seeing returns.
Volvo A.B. (OTCPK:VLVLY) (OTCPK:VOLAF), a Swedish manufacturer of trucks, buses, construction vehicles, renowned for quality via safety, has been somewhat away from the spotlight of the industry. The company is suffering from stagnation in the European market and a decline in orders from the U.S., however this makes it a great moment to revisit the potential of Volvo. In my analysis, I conclude that Volvo is a valid option for investors that are prepared to deploy capital multiple times due to the fact that I expect a downturn in 2025, but cannot predict how long a stagnation will last.
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Full analysis: https://seekingalpha.com/article/4747551?gt=d91ef36dcdac9703
Valuation model: https://docs.google.com/spreadsheets/d/1omCFkuCiB1ZDQKGO2zMEnzBPbw_F47hUQi7KgKB4s8Q/copy