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• If you have ever wondered whether Hermès International Société en commandite par actions is truly worth its luxury stock price, you are in the right place for a fresh look at its value.

• While the stock is up a stunning 168.5% over the past five years and 3.0% over the last twelve months, it has dipped by 3.8% this past month and is down 8.3% year-to-date. This points to some shifting market sentiment.

• Recent headlines have highlighted Hermès’ successful expansion into new international markets and continued product innovation, both contributing to investor optimism. However, the company now faces questions about whether current pricing fully reflects future growth as analysts and market watchers debate its next steps.

• On our valuation checks, Hermès International Société en commandite par actions scores 0 out of 6 for being undervalued. This makes for a compelling case to dig deeper. Let’s break down how different valuation approaches view Hermès, and stick around for a smarter way to gauge value at the end of this article.

Hermès International Société en commandite par actions scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

The Discounted Cash Flow (DCF) model estimates what a company is truly worth by projecting its future cash flows and discounting them back to their present value. For Hermès International Société en commandite par actions, this approach uses recent financial performance and analyst forecasts to estimate future value.

Currently, Hermès generates trailing twelve month free cash flow of approximately €4.34 billion. Analyst estimates project continued growth, with free cash flow expected to rise to around €5.19 billion by 2027. Over the following years, projections from Simply Wall St extrapolate a steady annual increase, reaching about €6.78 billion by 2035. These growth estimates are crucial in shaping the DCF outcome.

The DCF model arrives at an intrinsic value of €897.10 per share for Hermès. In comparison, the current market price is over 135% higher than this estimated fair value, indicating the stock is significantly overvalued based on these cash flow projections.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Hermès International Société en commandite par actions may be overvalued by 135.2%. Discover 921 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 Hermès International Société en commandite par actions.

The Price-to-Earnings (PE) ratio is widely recognized as a go-to valuation tool for established, profitable companies like Hermès International Société en commandite par actions. It helps investors weigh the stock price relative to how much profit the company generates, providing context for whether shares are expensive or reasonably priced compared to earnings.

However, a “normal” or “fair” PE ratio can shift depending on a company’s growth prospects and risk profile. Strong earnings growth or stability can justify higher PE multiples, while elevated risk usually leads to a lower fair multiple. It is important to compare Hermès not only to broad industry standards but also to custom benchmarks that reflect these nuances.

Currently, Hermès trades on a lofty 49.4x PE ratio. For context, the average for European luxury sector peers is 32.1x, while the broader luxury industry sits much lower at 17.4x. On the surface, Hermès appears much more expensive than both its closest rivals and the industry overall.

This is where Simply Wall St’s proprietary “Fair Ratio” comes into play. Unlike raw peer or industry comparisons, the Fair Ratio incorporates the company’s earnings growth, margins, risks, size, and sector specifics, offering a more customized and insightful benchmark for valuation. The Fair Ratio for Hermès stands at 31.9x, which reflects its above-average profitability, healthy growth, and sector leadership.

With Hermès’ current valuation well above its Fair Ratio, the stock looks significantly expensive according to this method as well.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1440 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives, a dynamic tool that connects your view of Hermès International Société en commandite par actions’ story with its key financial forecasts and a resulting fair value. This allows you to move beyond just ratios or peer comparisons.

With Narratives, you outline your perspective on Hermès by defining how you think the business will perform in terms of future revenue, profit margins, and growth, which then drives your fair value estimate for the stock. Narratives make valuation personal and actionable because you link your assumptions to the company’s numbers, and the platform shows you whether Hermès looks undervalued or overvalued at today’s share price.

This approach is both simple and interactive, and it is available to everyone in the Community area of Simply Wall St, where millions of investors regularly share and update their views. Narratives are not static. They automatically adjust when new information arises, like earnings results or news, keeping your outlook relevant. For example, some investors see high long-term growth and strong margins, and have a fair value above €3,000 per share for Hermès, while others highlight risks and slower growth, resulting in a fair value closer to €1,580. This illustrates exactly how different views lead to different investment decisions and timing.

Do you think there’s more to the story for Hermès International Société en commandite par actions? 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.

Companies discussed in this article include RMS.PA.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com