Nordex: Assessing Profitability Gains and Order Momentum Amid Elevated Valuation Risks

The onshore wind sector is in the midst of a renaissance, and Nordex Group (NEXG.DE) is riding the tailwinds with a mix of profitability gains and a robust order book. But as the company's valuation metrics climb to eye-popping levels, investors must ask: Is the stock's current price justified by its fundamentals, or is it overbought in a sector still navigating execution risks? Let's break it down.

Profitability Gains: A Recipe for Sustained Momentum

Nordex's Q2 2025 results were a masterclass in operational discipline. The company not only matched its 2024 sales of €1.9 billion but also surged EBITDA by 64.3% to €108.2 million, with an EBITDA margin of 5.8%—a leap from 3.5% in the prior year. This margin expansion, driven by cost management and pricing stability, is a green flag. Net income jumped from €0.5 million to €31 million, and free cash flow hit €145.1 million, up 54.4% year-over-year. These numbers aren't just impressive; they're a testament to Nordex's ability to translate order intake into tangible earnings.

The order book is where the magic truly lives. As of June 30, 2025, Nordex's total order book swelled to €14.3 billion, a 30% year-on-year increase. The Projects segment alone secured 2.3 GW of new orders in Q2, a 81.7% surge, while the Service segment added €5.5 billion in commitments. With 87% of Q2 installations concentrated in Europe—a region where Nordex has deep infrastructure and supply chain expertise—the company is leveraging its regional dominance to lock in long-term contracts.

Valuation Risks: Is the Sky the Limit?

Here's the rub: Nordex's valuation is stratospheric. The stock trades at a trailing P/E of 166.77, dwarfing the U.S. Renewable Energy sector's average P/E of 18.8x to 39.5x. Even Vestas (VWSB.DE), a direct competitor, carries a P/E of just 21.78x. While Nordex's margin expansion and order growth are undeniably strong, such a premium valuation demands near-perfect execution.

Debt-to-equity at 46.44% is manageable, but the company's interest coverage ratio—while not explicitly stated—must be scrutinized. In a sector where cash flow volatility is par for the course (due to project scheduling and weather-dependent demand), a high P/E becomes a double-edged sword. If Nordex's EBITDA margin slips back toward 5% or lower, the stock could face a rapid repricing.

The Bigger Picture: Onshore Wind's Long Game

The global onshore wind market is projected to grow at a 10.3% CAGR through 2034, driven by policy tailwinds in Europe, Asia-Pacific, and the U.S. Nordex's focus on 5–8 MW turbines—a sweet spot for cost efficiency—positions it well to capture this growth. However, the rise of 10–12 MW turbines from rivals like Goldwind and Siemens Gamesa could pressure margins if Nordex struggles to scale its technology stack.

Investment Verdict: Buy for Growth, But Watch the Valuation

Nordex is a compelling story for investors who believe in the long-term transition to renewables. Its order backlog, margin discipline, and regional expertise in Europe are hard to ignore. However, the stock's current valuation reflects near-perfect execution. For those already positioned in Nordex, it's a “hold” but with a close eye on margin trends and project delivery timelines. For new investors, consider dipping in at a pullback—ideally when the P/E drops closer to 30x or when the market corrects due to macroeconomic jitters.

Remember, the wind doesn't always blow in your favor. While Nordex is a leader in a sector with clear tailwinds, the key to unlocking its potential lies in balancing optimism with pragmatism. If the company can maintain its EBITDA margin above 5% and continue converting its €14.3 billion order book into cash flow, the sky's the limit. But if margins slip or execution falters, the stock could face a bumpy ride.

In the end, Nordex is a high-conviction trade for those who see a future where onshore wind is the backbone of the energy transition. But with great potential comes great risk—especially when the valuation looks more like a hurricane than a breeze.