A Fresh Look at Zegna (NYSE:ZGN) Valuation Following Direct-to-Consumer Growth in Latest Results

Ermenegildo Zegna (NYSE:ZGN) just released its third quarter revenue numbers, showing a small year-over-year uptick. This increase was largely powered by growth in its direct-to-consumer network. Management remains upbeat about the ongoing momentum.

See our latest analysis for Ermenegildo Zegna.

The upbeat revenue figures and momentum in Zegna’s direct-to-consumer channels appear to have resonated with investors, as shown by the 14.7% share price return over the past 30 days and a notable 33.6% total shareholder return in the last year. While momentum is building in the short term, long-term gains have been less consistent, with a slightly negative total return since listing.

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With excitement building around Zegna’s direct-to-consumer gains and share price momentum, the big question for investors is whether the current valuation still offers a buying opportunity or if the market has already priced in future growth.

Most Popular Narrative: 2.8% Undervalued

The fair value from the most widely followed narrative stands slightly above the last close, hinting at a modest upside. This view weighs future growth and current execution in the context of luxury sector dynamics.

The strategic focus on direct-to-consumer (DTC) channels, aimed at increasing brand control, improving gross margins, and enhancing customer experience, is expected to drive long-term revenue growth and improve net margins across the Zegna, Thom Browne, and TOM FORD brands.

Read the complete narrative.

Curious about which growth assumptions and bold profit projections anchor this valuation? The narrative banks on strategic expansion and margin improvement. See which financial forecasts drive this fair value assessment. The details may surprise you.

Result: Fair Value of $10.74 (UNDERVALUED)

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

However, ongoing challenges in Greater China and pressure on margins from rising expenses remain key risks that could disrupt Zegna's positive momentum.

Find out about the key risks to this Ermenegildo Zegna narrative.

Another View: Is the Market Too Optimistic?

When sizing up Zegna against valuation multiples, its price-to-earnings ratio stands at 24x, which is notably higher than the US luxury sector average of 19.7x and also above its own fair ratio of 17.5x. Compared to the peer average of 57.3x, it seems more affordable, but being priced above sector and fair ratio benchmarks signals some valuation risk if growth does not accelerate. With this gap, are investors overpaying for current momentum?

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

Build Your Own Ermenegildo Zegna Narrative

If you see the story differently or want to dig into the numbers yourself, you can quickly craft your own narrative in just a few minutes. So why not Do it your way?

A good starting point is our analysis highlighting 1 key reward investors are optimistic about regarding Ermenegildo Zegna.

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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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