6
LVMH Moët Hennessy - Louis Vuitton, Société Européenne (MC.PA)
- Equity
- France
- Consumer Cyclical
Preparing report
RISK
RETURN
Key risk factors
Negligible price volatility
Strong & resilient to price shocks
Low default risk
Key return factors
Very strong margins and returns
Overvalued vs peers
Good growth
Company profileLVMH Moët Hennessy - Louis Vuitton, Société Européenne operates as a luxury goods company worldwide. The company offers champagnes, wines, and spirits under the Clos des Lambrays, Château d'Yquem, Dom Pérignon, Ruinart, Moët & Chandon, Hennessy, Veuve Clicquot, Ardbeg, Château Cheval Blanc, Glenmorangie, Krug, Mercier, Chandon, Cape Mentelle, Newton Vineyard, Cloudy Bay, Belvedere, Terrazas de los Andes, Bodega Numanthia, Cheval des Andes, Woodinville, Ao Yun, Clos19, and Volcan de mi Tierra brands. It also provides fashion and leather products under the Berluti, Celine, Christian Dior, Emilio Pucci, FENDI, Givenchy, Kenzo, Loewe, Loro Piana, Louis Vuitton, Marc Jacobs, Moynat, Patou, and RIMOWA brands. In addition, the company offers perfumes and cosmetics under the Acqua di Parma, Benefit Cosmetics, Cha Ling, Fenty Beauty by Rihanna, Fresh, Givenchy Parfums, Guerlain, KVD Beauty, Kenzo Parfums, Maison Francis Kurkdjian, Make Up For Ever, Marc Jacobs Beauty, Officine Universelle Buly, Parfums Christian Dior, and Perfumes Loewe brands; watches and jewelry under the Bulgari, Chaumet, Fred, Hublot, Repossi, TAG Heuer, Tiffany & Co., and Zenith brands; and custom-designed yachts under the Feadship brand name, as well as designs and builds luxury yachts under the Royal Van Lent brand. Further, it provides daily newspapers under the Les Échos brand; Belmond, a luxury tourism service; home other activities under the Belmond, Cheval Blanc, Connaissance des Arts, Cova, Investir, Jardin d'Acclimatation, La Samaritaine, Le Parisien, and Radio Classique brands; and selective retailing products under the DFS, La Grande Epicerie de Paris, Le Bon Marché Rive Gauche, Sephora, and Starboard Cruise Services brands, as well as operates Jardin d'Acclimatation, a leisure and amusement park. The company operates 5,556 stores. LVMH Moët Hennessy - Louis Vuitton, Société Européenne was incorporated in 1923 and is headquartered in Paris, France.
Valuation: Overvalued
Multiple
TTM
NTM
P/E
23.00
21.80
PEG
1.60
-
P/B
5.70
4.40
P/S
4.00
3.90
P/FCF
32.80
9.10
EV/EBITDA
15.00
18.70
Based on key historical and expected multiples, the stock is overvalued relative to its peers. Specifically, the stock is fairly valued on P/E, overvalued on EV/EBITDA, reasonably priced on P/FCF.
Performance: Mixed
Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 7ppts and its growth decelerated by 4ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.
Analyst view: Neutral
The average target price is 942 and suggests 33% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 1000.0. This translates into 41% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 780.0. This suggests 10% upside potential. Even the most pessimistic analyst believes there will be stock growth.
Profitability: Very strong
RoE
LVMH Moët Hennessy - Louis Vuitton, Société Européenne reported a return on equity (RoE) of 24.9% in the last 12 months, down from 26.1% in FY23. The market consensus projects an RoE of 23.9% in FY24, again ahead of its peers.
RoA
Another important profitability metric, return on assets (RoA), amounted to 10.6% in the last 12 months, a decrease from 10.9% in FY23. The market analysts predict that RoA will be 10.6% in FY24, again stronger than its peers.
RoCE
In the last 12 months, the return on capital employed (RoCE) declined to 13.7%, above the peers. The consensus estimate for FY24 for RoCE is 20.8%, again ahead of the peers.
Net margin
EBITDA margin
Historically, MC.PA has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 17.6%, down from 17.8% in FY22. The company has reported good EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 29.3% in the last 12 months, a decline from 35.0% in FY23.
RoIC / WACC = 3.1(excellent value creation)
The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 3.1 in the past several years. This ratio implies a excellent shareholder value creation. Growth: Good
Revenue
EBITDA
EPS
Free cash flow
MC.PA reported revenue of EUR 86 153mn in the last 12 months, up 9% from FY22. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 8% from FY22 to EUR 30.33. Market expects EPS to reach EUR 31.63 in FY24.Revenue growth has been moderate in the past several years (positive-to-neutral), while EBITDA has grown rapidly in recent years (positive). This all contributed to fast EPS growth (positive). At the same time, free cash flow has been growing poorly in recent years. We emphasize the highly volatile dynamics of all key metrics. This is an extremely negative factor.
Dividends: Decent
Dividend paid
Dividend yield
The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been moderate and on par with its peers. On average, the company pays dividends twice a year.
Default risk: Low
The risk of default is low. We note strong positions in its industry, resilient historical revenue growth, robust profitability, solid return on capital, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors and we point to excessive margin volatility, and poor working capital management.
Volatility: Negligible
In normal market circumstances, MC.PA is not volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will stay within a narrow range. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. We would also like to highlight the negligible intraday volatility of the instrument.
Stress-test: Negligible
In highly turbulent market conditions, MC.PA is not volatile. In other words, the stock will fall far less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be very low.
Selling difficulty: Low
MC.PA boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and is unfavourable on the days with the lowest activity. However, under highly turbulent market conditions, the trading volume tends to improve significantly.
Country risk: Very low
The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.
Other risks: Negligible
No other major risks have been identified.