Inwido stock analysis: A company for the future?

Quick thoughts on Inwido and my views on the company:

When I first looked at Inwido, I fell a bit in love. They had an absolutely fantastic growth over time and gave me the impression that this is a journey I want to be a part of. I set a price for acquisition and got the opportunity to enter Inwido between 2022 and 2023, during the downturns.

But to move away from myself and focus more on the company I'm going to go through now: Inwido primarily delivers windows, doors, and other related services connected to home design here in Europe. They are market leaders in the Nordic region and are working hard to expand into Europe.

Inwido is mainly a decentralized company that gives its subsidiaries the freedom to operate as they wish.

Strategy:

• Growth and expansion: One of the most important things for Inwido is to maintain control over the Nordic market. They also want to continue expanding into Europe. This can be achieved through acquisitions and by expanding their product portfolio.

• Innovation: They want to continue with design and products focusing on smart products and energy efficiency. This means they will incorporate more technology moving forward and continue with high-quality products.

• Economy: They maintain the guidance for 2030, which suggests a doubling of the top line from the peak year 2022. They also focus on controlling costs and maintaining a healthy operational income.

Economic Stock Analysis of Inwido:

In this analysis of Inwido, I see a company that has quite good control over its finances and has consistently shown that it can maintain a stable bottom line. They have managed to maintain financial control during a period when new construction has not been performing strongly and have sustained an acceptable bottom line despite cost pressures and interest rate challenges affecting the entire industry they belong to.

They have proven to be a strong player in their field, and in Q2, they report a significant increase in their backlog, which could indicate that the market is beginning to pick up again.

Overall, I am positive about Inwido's finances, and I will now go through each segment individually.

Statement:

So, I would like to start with the negative aspects. Inwido has relatively low margins, below 10%, which means that small fluctuations can cause more significant problems. It doesn't take much to push the result downward, at least in percentage terms. They also have a low EBIT margin, so there are a lot of costs associated with selling their products.

On the positive side, Inwido has managed to significantly strengthen its results from 2014 to 2023, despite COVID-19 and the current economic situation following Russia's invasion of Ukraine.

I find this extremely impressive, especially since the real estate sector is struggling. Consider examples like Byggma, Byggmax Group, Selvaag Bolig, and AF Gruppen.

A near doubling of revenue is somewhat disappointing to me, but they have reiterated and maintained their guidance for 2023, where they expect revenue of 20,000. If they can also improve their margin further, Inwido will be well-positioned for continued dividends and growth.

	NET INCOME	EBIT	EBIT Margin	RESULTS	Margin
2014	4915.8	374.2	7.61%	268.4	5.46%
2015	5220.1	460.2	8.82%	214.8	4.11%
2016	5672.4	655.7	11.56%	446.3	7.87%
2017	6371	521.2	8.18%	324.8	5.10%
2018	6666.6	617.6	9.26%	438	6.57%
2019	6630.6	601.4	9.07%	433.2	6.53%
2020	6680.9	694.6	10.40%	500.6	7.49%
2021	7724.9	901.9	11.68%	712.9	9.23%
2022	9546.8	1063.3	11.14%	807.6	8.46%
2023	8970.4	977.8	10.90%	703.2	7.84%

Balance

They have significantly increased their debt but have fairly good control based on sales. It seems that the interest rate peak has been reached in some places, and Inwido has proven that they can grow even in tough times. They usually have strong liquidity (see cash), which has given the company a good opportunity to enter the market (as they have done in the last 12 months) and acquire new companies.

Overall, I feel that the debt is starting to get a bit high, but with the current EBIT, this is well managed.

As a small note, Q2 2024 looks somewhat weaker, but I will briefly go through this further down in this review..

	Short term debt	long term debt	Total Liabilities	Equity	Total Assets	Cash
2014	93.9	1141.1	2300.9	2793.4	5094.3	87.6
2015	47.5	1090.3	2315.1	2890.9	5206	244.6
2016	49.6	1942.8	3298.9	3012.6	6311.5	308.6
2017	394.1	1702.1	3485.1	3167.1	6652.2	410
2018	124.8	2199	3652.2	3501	7153.2	165
2019	123.3	2212.1	3695	3775.5	7470.5	242.8
2020	110.9	2134.9	3861.8	4155.1	8016.9	1132.7
2021	113.2	1664.4	3789.2	4648	8437.2	1073.4
2022	152.8	1953.7	4466.5	5319.4	9785.9	1319
2023	160.7	2025	4331.4	5345.8	9677.2	905.4

Cash flow

After more than tripling their operations, they still have a lot of growth potential by investing quite rapidly after income. They have managed to double the dividends and generally have a very strong cash flow. I have nothing to criticize here and give a solid thumbs up.

	Operations	Investment	Finance flow	utbytte
2014	309.6	-342.7	42.9
2015	519.4	-182.9	-177.3	-115.9
2016	488.9	-524	97	-144.9
2017	591.5	-244	-249.3	-202.9
2018	434	-629	-53.5	-202.9
2019	925.6	-273.7	-574.1	-144.9
2020	1209.3	-179.7	-111.1
2021	1014.1	-255.4	-839	-260.9
2022	1070.9	-426.8	-461.2	-356.5
2023	1153.2	-773.6	-776.5	-376.8

Strengths and Risks

Strengths and Competitive Advantages

• Becoming more diversified: This diversification has helped Inwido maintain its financial stability.

• High likelihood of an improved market situation: This will help increase sales and improve margins.

• High quality: Inwido is building its brand, and with the EU's ESG requirements, Inwido could emerge quite strong. Replacing high-quality windows will become necessary in many households, and Inwido will be ready.

• Strong economy: Inwido's strong financial position allows the company to withstand challenges.

• Currency: A diversified income helps diversify risk. A weak Swedish and Norwegian krone has provided currency diversification. If Inwido reported results in Euros, it would have been much weaker this year.

Challenges and Risk Factors:

• Geographical dependency: Scandinavia accounts for 50% of income, and Eastern Europe for 25%. A 22% decline in Eastern Europe has significantly impacted the current report.

• Decentralization: This can lead to lower synergy in acquisitions.

• Competition: Other players may enter and push prices further down. Consumers might focus on lower-cost products during a period, allowing new low-cost producers to enter the market.

• Low margin: Inwido's margin is low, which is rarely a positive sign. This indicates that the market is tough and could create noise in the future.

Conclusion

• Future Prospects:

From SEK 8,970.4 in 2023 to SEK 20,000 in 2030 on the top line, Inwido's management has made it clear: They have faith. I wonder what this will mean for the results, but if they achieve this, it is incredibly strong.

The order backlog and intake have increased, indicating a stronger market ahead.

• Continued strong uncertainty in the market: Consumer economy remains weak, and several central banks are holding back on lowering interest rates.

Summary:

Inwido is standing strong in a weak market and has been one of the biggest surprises for me since the war started. I am extremely positive about what they have achieved during this period and look forward to further reports from the company.

They have a solid financial position and good liquidity, but 2024 has looked relatively weak in terms of margins.

Sales have declined, EPS has almost halved, and if it weren't for the backlogs, I wouldn't be as positive as I am right now. Liquidity hasn't been this low in a long time (416.5 compared to Q2 2023, which stood at 1139.4).

They have still managed to pay dividends with just one quarter and remain strong in terms of cash flow.

Why did I buy Inwido?

The company had good financial growth, and I believe they deliver products that would continue to sell, even if they might perform weaker for a period.

I entered Inwido at 95 and 110 NOK, which I felt was a good entry price.

They give me exposure to the construction industry that doesn't involve heavy machinery and extends into maintenance, new construction, and is needed in almost everything.

They are well-prepared for the EU's ESG requirements.

Some reasons to buy or not buy Inwido?

This will be somewhat repetitive from my reasons for buying.

Buy:

• They are well-prepared for the EU's ESG requirements.

• Exposure to several areas within real estate and construction.

• They show strong growth in certain areas (see Western Europe above).

• The order backlog gives the impression of better times ahead.

Don't Buy:

• The valuation is considerably higher now, and a P/E of 18 indicates that expectations are already built into the company. *Based on 9.34 EPS.

• If Inwido does not deliver in the next few quarters, the EPS will be significantly lower. This could lead investors to sell off and push the stock price down.

• Low margins, which can make it difficult when costs increase without growth.

• Doubling of debt since 2014 (although they generally have better liquidity with cash).

I hope you have enjoyed this stock analysis.

If you want to dive deeper into the numbers, you can find the stock on my index page, where I have provided Google Sheets access for those interested.