Business Situation and Evaluation of LVMH

Abstract

This article contributes to investigating the financial situation and company value of Louis Vuitton Moët Hennessy. Referring to the financial reports of LVMH and its luxury industry competitors Hermès, Kering, and Richemont for 2019-2022, multiples are calculated to make comparisons. There is an analysis of LVMH's business statistics such as earnings, debt ratios, payback periods, etc. Two main methods are used in the evaluation process. The first method, called EBITDA/EV, is also considered a multiple of the business value and is primarily used to assess a company's profitability. The second valuation is based on the price-to-earnings ratio and forecasted future earnings. It is used to see if LVMH's stock price is too high or too low. The results show that LVMH is overrated. The researchers also elaborate on the impact that overvalued prices can have on investors’ decision-making, and make recommendations on the future development of LVMH in terms of product manufacturing, brand image maintenance, and sales channels expansion.