Christian Dior (ENXTPA:CDI) shares have been quietly climbing over the past month, delivering gains of 16% for investors. The stock’s recent performance has caught the attention of many who track the luxury sector.
Christian Dior's recent 16% rally caps off a strong 90-day period, with a 31.2% share price return signaling that momentum has turned decisively positive. While this year started slowly, the 1-year total shareholder return of 13.9% shows that patient investors have still been rewarded.
But after such a steep climb, is Christian Dior’s share price still undervalued compared to its true potential? Or has the market already factored in all the expected growth ahead, leaving little room for new buyers?
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Price-to-Earnings of 23.5x: Is it justified?
Christian Dior’s shares currently trade at a price-to-earnings (PE) ratio of 23.5x, putting them well above the European luxury industry average of 20.7x. The stock’s last close of €594 places it at a substantial premium compared to its sector peers.
The price-to-earnings ratio measures how much investors are willing to pay for each euro of earnings and is often used to weigh a company’s market expectations against its actual profit generation. For a luxury brand like Christian Dior, investors may accept a higher PE if they expect durable pricing power, brand strength, and long-term growth.
Dior’s elevated multiple suggests the market is confident in the company’s brand and future profitability, despite some recent softness in net margins and negative annual earnings growth. However, the current valuation may be demanding unless future profit growth accelerates or margin pressure eases.
When compared to the industry, Dior’s PE sits above the sector average, making the stock appear expensive on this measure. While its ratio remains well below the peer average of 39.9x, investors are clearly expecting more than the typical luxury stock. If the company aligns more closely with its historical or industry “fair” ratio, there could be room for a valuation reset.
Another Perspective: Discounted Cash Flow Tells a Different Story
While Christian Dior’s current price-to-earnings ratio signals overvaluation against sector peers, the SWS DCF model tells a different story. According to our DCF analysis, Dior’s shares, trading at €594, sit nearly 50% below the estimated fair value of €1,175.98. This suggests a significant undervaluation.
If you want a different perspective or prefer to check the numbers firsthand, you can easily craft your own narrative in just a few minutes. Do it your way
A great starting point for your Christian Dior research is our analysis highlighting 1 key reward and 1 important warning sign that could impact your investment decision.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.
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Through its subsidiaries, engages in the production, distribution, and retail of fashion and leather goods, wines and spirits, perfumes and cosmetics, and watches and jewelry worldwide.
