Ferrari (RACE) Stock Looks Strong On Returns But Rich On Earnings

Ferrari stock has delivered a strong 90.1% return over the past five years, yet its current valuation screens as expensive on Simply Wall St's checks, raising the question of how much of the story is already priced in after a recent pullback.

• Over five years, Ferrari has returned 90.1%, which places recent weakness in the last year in the context of a longer period of strong gains.
• The launch of the limited-edition 12Cilindri Manuale and a fully booked order book for about two years can support confidence in Ferrari's pricing power. At the same time, execution risks around newer product lines, including electric vehicles, may still weigh on how much investors are willing to pay for that growth.
• Ferrari scores 0 out of 6 on Simply Wall St's broader valuation checks. This points to a stock that currently leans expensive rather than a clear bargain on metrics such as P/E and price-based ratios, as shown here: 0 out of 6 valuation checks.

The issue now is whether Ferrari's current share price leaves enough valuation headroom for investors who are attracted to its brand strength and order visibility.

Find out why Ferrari's -24.8% return over the last year is lagging behind its peers.

Has Ferrari Run Too Far on Earnings?

The P/E ratio is a useful lens for Ferrari because earnings are a key focus for investors in premium, brand driven businesses. Ferrari currently trades on about 36.3x earnings, which is more than double the Auto industry average of 14.9x and well above the peer group average of 20.0x.

The fair P/E ratio implied by Simply Wall St's model is 17.3x, which is the level that could be expected once Ferrari's growth profile, margins, industry, size and risks are factored in. The gap between this fair multiple and the current 36.3x suggests the stock screens overvalued on earnings, even after recent share price weakness. Despite support from the 12Cilindri Manuale launch and a strong order book, the current price already embeds a rich earnings multiple compared with both peers and the model's fair value anchor.

On the P/E multiple, Ferrari stock currently looks overvalued relative to both its sector and the modelled fair ratio.

See what the numbers say about this price — find out in our valuation breakdown.

The Ferrari Narrative: What Would Justify Today's Price?

Simply Wall St Narratives pick up where Ferrari's valuation puzzle leaves off by spelling out which assumptions about Ferrari's future growth, margins and earnings would need to play out for the stock to be worth materially more or less than today's price. Each one treats fair value as a thesis about the business that can be tracked over time rather than a one off snapshot. These Narratives sit on Simply Wall St's Community page and give you a structured way to think about what the current share price is asking you to believe.

If you have a clear, number driven view on whether Ferrari's 12Cilindri Manuale launch and fully booked order book really support today's valuation, share a Narrative in the Simply Wall St community and spell out the assumptions behind your stance.

Set out your case on Ferrari's growth, margins and execution, then track how that thesis holds up as new results and updates come through.

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

The Bottom Line

For Ferrari, the current setup is mostly about how much investors are paying for its story. On market multiples, the stock screens overvalued, with a rich P/E relative to both sector peers and the modelled fair ratio, and the broader checks point to a weak value profile. From here, the key debate is whether Ferrari can deliver on growth and margins strongly enough, and with clean execution on newer product lines, to justify keeping that premium multiple in place.

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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