Hermès (ENXTPA:RMS): Exploring Valuation After Recent Share Price Dip

Hermès International Société en commandite par actions (ENXTPA:RMS) has seen its shares move only slightly over the past week, with the stock down just under 3%. The company has delivered positive revenue and earnings growth recently, which may be part of the ongoing conversation among investors.

See our latest analysis for Hermès International Société en commandite par actions.

While Hermès International’s shares have dipped in recent weeks, the bigger picture looks resilient, with a 1-year total shareholder return of 7.2% and a striking 5-year total return of 165.5%, reflecting strong long-term momentum.

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But with shares staying near historic highs despite recent dips, investors have to ask: Is Hermès International undervalued at current levels, or is the market already factoring in all of its future growth potential?

Most Popular Narrative: 11.9% Undervalued

The most popular narrative places Hermès International’s fair value at €2,391.70, noticeably higher than the recent closing price of €2,108. Even after recent cuts to sector growth forecasts, valuations remain robust, hinting at continued belief in the company’s unique strengths.

Scarcity-driven supply model, underpinned by disciplined capacity investments (opening four new leather workshops in the next four years) and exclusive distribution expansion into key markets (for example, the U.S., China, and India), enables Hermès to maximize pricing power and protect industry-leading gross/net margins.

Read the complete narrative.

Want to understand why Hermès is valued like a tech superstar? The key narrative assumptions hinge on sustained double-digit profit expansion and bold future margins. Curious about which aggressive forecasts and stylish supply moves drive this valuation? See the surprising financial logic behind the headline fair value.

Result: Fair Value of €2,391.70 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing economic uncertainty and shifting consumer sentiment, especially among first-time buyers, could slow Hermès’ anticipated growth and put the long-term bull case to the test.

Find out about the key risks to this Hermès International Société en commandite par actions narrative.

Another View: Multiples Send a Warning

While the most popular fair value estimate says Hermès is undervalued, our market valuation check raises a red flag. Hermès trades at a price-to-earnings ratio of 49.3x, which is not only much higher than its industry average of 20.7x but also well above its fair ratio of 31.9x. Such a premium means investors are paying a steep price, and if the market shifts toward that fair ratio, there could be significant downside risk. Which valuation lens will prove more accurate as sentiment evolves?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Hermès International Société en commandite par actions Narrative

If you’d rather come to your own conclusions or want to dig into the numbers yourself, you can build your own Hermès narrative in just a few minutes. Do it your way.

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Hermès International Société en commandite par actions.

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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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