Playing for Share Value: A Fundamental Analysis of AS Roma S.p.A.

Daniele Capezzuto

Student thesis: Master thesis


Over the past two decades, the football industry has become of economic relevance in countries like the UK, Germany, Spain, Italy and France. Nonetheless, revenue in itself is not a sufficient indication of the attractiveness and profitability of an industry. In fact, football is generally seen as an industry where sports achievements are more important than generating profits. While this might be true for some private clubs, those traded on the stock exchange, such as AS Roma S.p.A., are assumed to be driven by profit-maximization. The Italian club, currently listed on the stock exchange, experienced a change of control back in 2011. An American group led by James Pallotta took the reign of the club, with the ambition of creating a financially sustainable company as well as elevating the club among the European football elite. Since then, the profitability of the club has improved, along with better results on the pitch. Nonetheless, the company’s core operations are still not profitable, as evidenced by the 2016 core profit margin of -34%. Adding to the already negative picture, is the fact that the club did not qualify for the Champions League group stage in 2016/17. This will significantly impact the financials of next period, in a negative way. Looking at the medium-run, the club’s operations are not expected to break even until the new stadium opens in 2021. This project has been a priority for the management team since their inception and likely a key factor for the investors’ commitment. The new stadium is in fact expected to boost match-day and commercial revenue, and ultimately make the company profitable. Nonetheless, the expected profitability combined with the estimated cost of capital do not validate the observed share price and the market expectations. More specifically, AS Roma S.p.A. is expected to earn a return on operations that is lower than its required return on capital. In other words, the company is destroying shareholder value and, consequently, the market value of equity is negative. The overly optimistic expectations reflected in the current share price are not supported by the valuation obtained from comparable analysis either. Therefore, the considerable difference between current market expectations and the fundamental analysis suggests that investors in AS Roma S.p.A. might not act in the interest of making a profit.

EducationsMSc in Accounting, Strategy and Control, (Graduate Programme) Final Thesis
Publication date2017
Number of pages119
SupervisorsOle Vagn Sørensen