Valuation of Zalando SE

Alan Ramilton

Student thesis: Master thesis


The purpose and main objective of this report is to estimate the intrinsic value per share of the leading online fashion e-tailer Zalando SE as of 1 January 2017 by using renowned models, market practice and applicable public information. The valuation is carried out in a structured approach, covering aspects from larger industry drivers to firm specific factors.
The valuation process is initiated with a brief overview of the European online fashion market followed by a introduction of Zalando. Next, a strategic analysis is performed, addressing the industry and company specific attributes using theoretically accepted frameworks such as Porter’s five forces. The analysis shows that the industry is characterised by strong scale benefits and high entry and size barriers, coupled with strong indications of a “winner-takes-it-all”-market. Zalando is very well positioned to become a European champion in fashion due to its strong technological and operational capabilities. The financial analysis focuses on sales growth and profitability, evidencing the scale benefits in the market, with Zalando’s financials showing excellent trends both in maintaining high sales growth and increasing profitability. Competition tends to erode competitive advantages and, with them, profitability. Therefore, companies must continually seek and exploit new sources of competitive advantage if they are to create long-term value. Zalando shows outstanding tendencies in doing so by optimising its platform to stay ahead of the game.
The findings are collectively used to forecast future cash flows and are the basis for the discounted cash flow valuation, which result in an intrinsic value per share of EUR 47.6, corresponding to over 30% upside potential to the observed share price of SEK 36.1. The WACC is estimated to be 6.5%.

EducationsMSc in Advanced Economics and Finance, (Graduate Programme) Final Thesis
Publication date2017
Number of pages82