Harland & Wolff Group Holdings Plc (LSE:HARL) made headlines when they announced a widened annual loss for 2022 despite a rise in revenue. The company is expected to report annual revenue of £27.96m, and loss for the year is expected to be at £70.4m.

Going forward, the company expects to remain on track to meet its 2023 revenue guidance. Despite that, the news of the loss resulted in a 4.8% decline in price. Let’s explore more about the Harland & Wolff share price.

Key Points

• Harland & Wolff is expected to report a widened annual loss for 2022 despite a rise in revenue.
• The company recently delivered its first complete vessel in more than 20 years for a London-based waste management firm.
• The company is unprofitable, and losses have increased over the past five years.

What does Harland & Wolff do?

Harland & Wolff is a British shipbuilding and fabrication company headquartered in London. It specialises in ship repair, shipbuilding, and offshore construction. Since 1861, they have been making some of the world’s most famous ships, including the Titanic.

After 20 years, Harland & Wolff delivered its first complete vessel in more than 20 years for a London-based waste management firm, Cory.

The bull case for the Harland & Wolff share price

The Harland & Wolff share price enjoyed a brief bullish period from October 2022 to November 2022. The stock spiked high from 5.65p to 25.1p, representing a more than 3-fold increase, in almost a month.

Harland & Wolf is one of the high-growth companies in the industry. No doubt, the company is unprofitable, and losses have increased over the past five years. But this is all about to change. The shipbuilder has recently earned a navy contract worth £1.6 billion¹. The management of the team is very excited and believes this will put their company back on the international map.

The bear case for the Harland & Wolff share price

Harland & Wolff share prices have undergone prolonged bearish periods in the past years. From a price of 27.75p in November 2021, the stock dropped down to 5.65p in November 2021. During this one year, the stock lost 80% of its value.

Another bearish run was experienced when the price was at 25.1p at the end of November 2022. And the shipbuilder’s stock has been declining to date. The stock last closed at 9.07p. During this period, the stock has lost 64% of its value.

One of the major concerns for investors is the rising debt and the unprofitability of the past few years. A prolonged state of inability to generate profits makes investors lose confidence. Moreover, the reduced revenue generation for the year 2022, than forecasted, has further added fuel to the fire.

Harland & Wolff share price prediction

In light of the company’s ongoing performance, analysts neither have a progressive stance nor a negative stance for the future of the shipbuilder’s stock.

The 12-month forecast states the price to be at 13p. Compared to the current valuation, it seems the recent excitement surrounding this business has pushed the market capitalisation beyond its intrinsic value. In other words, the stock is overpriced.

However, this assumes that analyst share price forecasts for Harland & Wolff are accurate. There’s always an element of uncertainty in every forecast. Therefore, investors shouldn’t solely make their investment decisions on analyst forecasts.

Should I buy Harland & Wolff shares today?

Harland & Wolff has won several contracts in the past few months. One of the most important ones is the navy contract, which is a consortium comprising BMT, Harland and Wolff, and Navantia UK. This will prove to be a major comeback for the company, with huge investment expected in the near future. Production of the ships is due to start in 2025, with all three expected to be operational by 2032.

While this is a time-consuming process, I believe now is an excellent time to buy the company’s stock. While the valuation may be a bit rich today, I believe for my portfolio, paying the premium is worthwhile for the potential long-term gain.

Article sources

1. BBC. Harland and Wolff: Shipbuilder wins Royal Navy contract

Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.