Is Ermenegildo Zegna (ZGN) Pricing Reflecting Its Listed Luxury Group Growth Story?

• If you are wondering whether Ermenegildo Zegna shares offer good value at today’s price, you are not alone. This article is designed to walk you through what the market might be pricing in.
• The stock last closed at US$9.00, with recent returns showing a 6.2% decline over 7 days, a 13.7% decline over 30 days and year to date, and a 3.4% gain over 1 year. This gives a mixed picture of how sentiment and perceived risk have shifted over different time frames.
• Recent news coverage has focused on Ermenegildo Zegna’s position as a listed luxury group and how investors are assessing its brand strength, pricing power and long term expansion plans. This context has framed recent price moves as the market reacts to how these factors might influence the business over time.
• On our checks, Ermenegildo Zegna scores 2 out of 6 for potential undervaluation. We will look at how different valuation methods line up, then finish by highlighting a more complete way to think about what the current share price really implies.

Ermenegildo Zegna scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Ermenegildo Zegna Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model projects a company’s future cash flows and then discounts them back to today, aiming to estimate what the business might be worth right now.

For Ermenegildo Zegna, the model used is a 2 Stage Free Cash Flow to Equity approach, based on cash flow projections in €. The latest twelve month free cash flow is about €160.05 million. Analysts provide estimates for the next few years, and Simply Wall St then extrapolates further to build a 10 year path, with projected free cash flow of €126.48 million in 2035 after discounting the earlier years back to today.

Bringing all of those discounted cash flows together gives an estimated intrinsic value of €4.47 per share. Compared with the recent share price of US$9.00, this DCF output suggests the stock is materially above the level implied by the cash flow model, with an intrinsic discount figure indicating it is 101.2% overvalued.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Ermenegildo Zegna may be overvalued by 101.2%. Discover 875 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Ermenegildo Zegna.

Approach 2: Ermenegildo Zegna Price vs Earnings

For a profitable business, the P/E ratio is a useful way to think about what you are paying for each unit of earnings. It helps you compare how the market prices one company’s profits relative to others.

What counts as a “normal” P/E depends a lot on growth expectations and risk. Higher expected earnings growth or lower perceived risk can justify a higher multiple. Slower growth or higher risk usually points to a lower, more cautious P/E.

Ermenegildo Zegna currently trades on a P/E of 20.40x. That sits above the Luxury industry average of 18.75x, and below the peer group average of 35.91x, so the stock is priced between broad sector levels and more expensive peers. Simply Wall St’s Fair Ratio for Ermenegildo Zegna is 16.28x, which is its proprietary view of what a reasonable P/E could be given factors such as earnings profile, industry, profit margins, market cap and key risks.

This Fair Ratio can be more informative than a simple peer or industry comparison because it ties the multiple to company specific drivers rather than just what others trade on. With the current P/E above the Fair Ratio, the market price implies a richer earnings multiple than this model suggests.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1424 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Ermenegildo Zegna Narrative

Earlier we mentioned that there is an even better way to understand what a share price might be telling you, so let us introduce Narratives.

A Narrative is simply your story for a company, where you spell out what you think could happen to its revenue, earnings and margins, and what you see as a fair value, instead of only relying on headline ratios like the P/E.

On Simply Wall St, Narratives live in the Community page and give you an easy tool to connect three things: how you think Ermenegildo Zegna’s business story could play out, what that implies for its financial forecast, and what you believe is a reasonable fair value per share.

Once you set up a Narrative, the platform can compare your fair value to the current market price to help you consider whether the stock looks closer to a buy, a hold or a sell for your view. It also refreshes that view when new information such as news or earnings is added.

For example, one Ermenegildo Zegna Narrative might assume very cautious future margins and lead to a lower fair value, while another Narrative might assume stronger long term brand resilience and support a higher fair value, all using the same shared data but different perspectives.

Do you think there's more to the story for Ermenegildo Zegna? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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