LVMH: Strategic & Financial Valuation

Abstract

The intention of this thesis is to analyse the equity share price of LVMH Moët Hennessy Louis Vuitton SE, the French headquartered luxury goods conglomerate, and determine whether their equity shares are currently under-priced, adequately priced, or overpriced. A strategic and financial valuation of LVMH will be created to determine this subject as of December 31st, 2022.
To conduct an all-encompassing valuation, a strategic and financial analysis will be completed. The strategic analysis attempts to analyse the luxury goods industry and the position that LVMH encompasses in the industry. Through the application of various strategic methodologies, the performance of LVMH will be assessed through a qualitative lens. The financial analysis looks to identify the health of the business through profitability and liquidity metrics, a quantitative lens. Both the strategic and financial analysis form a basis for the projections and the assumptions which are imposed in the forecasted financial statements. Prior to determining the forecasted financial statements, the financials of LVMH were reformatted for the purpose of separating operating and financial activities. The operating activities represent the core revenue-generating activities which are the intrinsic business drivers of cash flow. The weighted average cost of capital was estimated at 6.48%. Through the symbiosis of all analyses, the estimated free cash flows to the firm were determined, inserted into the discounted cash flow model, and an implied equity price per share was attained. Further discourse through a multiples evaluation and a sensitivity analysis provides added reinforcement to the calculated price per share.
The thesis has various limitations and assumptions which are discussed and justified prior to the calculation of LVMH equity shares. The shares of LVMH are believed to be under-priced relative to the market pricing as of December 31st, 2022. An end valuation of €858.37 per share is determined.