Equity Valuation of Ferrari under Multiple Valuations

Abstract

This paper aims at determining the stock price of Ferrari, which is a leading company in the luxury performance car industry, to evaluate if it's overpriced or not and discuss the potential limitations of the valuation method. The valuation is based on multiple valuations. The target share price of Ferrari is calculated using the average P/E ratio after identifying Ferrari's comparable peer group. The paper calculates a share price of $91.98, which is significantly less than its current share price of $196.90, based on the P/E ratio valuation. The outcome suggests that Ferrari was expensive. Ferrari's dominant position within the industry as a whole and the inherent flaws in the valuation mechanism is the key factors influencing this. To have a better understanding of the company itself, more models, such as discounted cash flow valuation, are advised. P/E ratio valuation can be employed as an initial screening technique. This essay offers some insights into Ferrari and the entire high-performance automobile market, which can be helpful when calculating the share prices of top firms like Ferrari.