Hermès Stock Faces Fresh Scrutiny After Luxury Sector Weakness and Price Dip in 2025

Thinking about what to do with Hermès International Société en commandite par actions stock? You are not alone. Whether you are already holding shares or eyeing them for a spot in your portfolio, Hermès often comes up in discussions about luxury stocks. Its commitment to craftsmanship and brand prestige has kept it at the top of global luxury, but the big question on everyone’s mind is, does the price still make sense?

Looking at the recent stock performance, Hermès has cooled off after what can only be called a spectacular long-term run. While the past week and month saw modest dips of -0.9% and -3.3%, and year-to-date the stock is down -11.2%, these setbacks come after years of outsized returns. The stock is up 8.5% over the last year, 59.6% over the past three years, and a remarkable 187.4% over the past five years. Markets have experienced some volatility lately, particularly in the luxury sector as consumer sentiment shifts and global conditions evolve. This has nudged investors to re-evaluate both risks and potential rewards.

When it comes to valuation, let’s get right to it: Hermès scores a 0 out of 6 on our valuation checklist. By these six measures, it does not appear undervalued at today’s price. But before drawing any big conclusions, it’s worth digging into how these valuation checks work, which ones might matter most for a business like Hermès, and whether there is a smarter way to judge value for a company of this caliber. Let’s break down each approach, then explore what really matters for long-term investors.

Hermès International Société en commandite par actions scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Hermès International Société en commandite par actions Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) approach estimates what a company is truly worth by projecting its future cash flows and discounting them back to today’s value. This model builds on actual financial performance, analyst forecasts for the next several years, and long-term growth assumptions.

For Hermès International Société en commandite par actions, the most recent reported Free Cash Flow sits at €4.34 billion. Analyst consensus expects cash flow to rise to €5.29 billion by 2027, with further growth projected over the decade and reaching a forecast of €7.25 billion in 2035. While the first several years of the projection are based on analyst estimates, values further out are extrapolated to reflect slower, more stable growth as the business matures.

After discounting all these future cash flows back to the present, the model suggests an intrinsic value per share of €974.93. Comparing this figure to the current share price, the DCF model implies Hermès stock is 109.7% overvalued. This means that, based on cash flow fundamentals alone, Hermès currently trades well above what its future earnings potential would typically justify.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Hermès International Société en commandite par actions.

Our Discounted Cash Flow (DCF) analysis suggests Hermès International Société en commandite par actions may be overvalued by 109.7%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Hermès International Société en commandite par actions Price vs Earnings

The Price-to-Earnings (PE) ratio is a go-to metric for valuing profitable businesses like Hermès International Société en commandite par actions because it compares a company’s current share price to its earnings per share. For established, consistently profitable companies, the PE ratio offers a simple way for investors to gauge how much the market is paying for each euro of earnings. This ratio is especially meaningful in the luxury sector where predictable profits are common.

What counts as a “normal” or “fair” PE ratio isn’t set in stone. Higher expectations for future earnings growth can justify a higher PE, while greater risks or industry headwinds tend to pull it lower. Hermès currently trades at a PE of 47.82, outpacing both the luxury industry average of 18.79 and its direct peers at 26.37. This highlights just how highly the market values its brand and performance.

Simply Wall St’s proprietary Fair Ratio offers a more nuanced benchmark, factoring in earnings growth, profit margins, industry context, market cap, and specific risks. In this case, Hermès' Fair Ratio is calculated at 30.61. This makes it a more tailored gauge compared to using plain industry or peer averages, as it reflects Hermès' unique strengths and business profile.

Comparing the Fair Ratio of 30.61 with Hermès’ current PE of 47.82, it is clear the stock trades well above where it would be considered reasonable by these measures, even after accounting for growth and profitability. This suggests Hermès is overvalued on a PE basis at current levels.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Hermès International Société en commandite par actions Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let's introduce you to Narratives. A Narrative is your way of telling a story about a company, combining your personal perspective with your expectations around future revenue, earnings, and margins. This approach helps you arrive at your own fair value estimate beyond the standard ratios and models.

Narratives link a company’s journey and context to financial forecasts, allowing you to see how the story you believe in translates into numbers and, ultimately, a target price. This powerful tool is accessible right inside the Community page on Simply Wall St, where millions of investors share and refine their perspectives.

Using Narratives, you can decide when to buy or sell by directly comparing your Fair Value with today’s Price. This makes the process clearer and more tailored to your viewpoint. Narratives also update automatically when new information like news or earnings is released, ensuring your outlook stays relevant.

For Hermès International Société en commandite par actions, one investor’s Narrative might be bullish, valuing the stock at €3,000 thanks to optimism around luxury demand. Another, more cautious Narrative may set fair value at just €1,580 by factoring in consumer headwinds and margin risks.

Do you think there's more to the story for Hermès International Société en commandite par actions? Create your own Narrative to let the Community know!

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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