The DFC is not always sufficient to correctly evaluate a company, as it is based (especially through the
terminal value) on future values increasingly deferred over time, in an economic context which, on the
contrary, is characterized by strong volatility. For this reason, an analysis of multiples is also appropriate.
The multiples are calculated by dividing the share prices (taken from the stock markets) by the measures of
corporate performance such as sales revenue and net income or by accounting measures such as the book
value. For our analysis we have calculated the Price to Book ratio, the Return on Equity, the Price to Sales
ratio and the Price to Earnings ratio. Then, we have compared the results with those of similar firms, which
operate in the luxury fashion industry: Tod’s, Prada, Kering and Moncler.
P/B ratio: Salvatore Ferragamo has a P/B ratio of 4,01, so this means that an investor pays €4,01 for €1 of
book value. In comparison with competitors, Salvatore Ferragamo has a high P/B ratio, so this means that it
is expected to grow in the future, and it is a less risky investment. A higher P/B ratio implies that investors
expect management to create more value from a given set of assets.
ROE: P/B ratio is often looked at in conjunction with ROE. Return on equity measures how effectively
management is using a company’s assets to create profits. Large discrepancies between P/B ratio and ROE
often send up a red flag on companies. Overvalued companies frequently show a combination of low ROE
and high P/B ratios. If a company's ROE is growing, its P/B ratio should also be growing. So, Salvatore
Ferragamo is a good investment as it has a high P/B ratio and a high ROE.
P/S ratio: Salvatore Ferragamo has a P/S ratio of 2,24, so this means that an investor pays 2,24 for each
unit of sales; it is a good investment since the investor is paying less for each unit of sales than it would pay
if it invested in the other competitors.
P/E ratio: Salvatore Ferragamo has a P/E ratio of 34,40, so this means that it trades at 34,40 times earnings.
Compared to competitors, the P/E ratio of Salvatore Ferragamo is high and indicates that investors expect
higher growth from the company compared to the overall market. A higher P/E ratio shows that investors
are willing to pay a higher share price today because of growth expectations in the future.