Brief Summary
This video discusses the recent correction in LVMH's stock price and whether it now presents a buying opportunity. The analysis includes a review of the company's financials, including revenue, margins, and cash flow, as well as a discussion of qualitative factors such as brand image and management. The conclusion is that while the stock is becoming more attractive, investors should still conduct their own qualitative analysis to determine if the company's growth and margins will recover.
- LVMH's stock has corrected significantly, bringing it to levels that are starting to look attractive based on quantitative analysis.
- The company's revenue growth has stagnated, and margins have compressed slightly, but overall, the business remains strong.
- The investor needs to form an opinion on the qualitative part of the analysis and therefore the business.
Introduction: LVMH Stock Correction and Investment Perspective
The video begins by addressing the recent correction in LVMH's stock price, which has sparked renewed interest. The speaker notes that while he previously considered the stock too expensive, the current levels are becoming more relevant based on his quantitative analysis. He outlines the video's structure, which includes examining the reasons for the decline, presenting updated financial figures, and sharing his overall conclusion. He emphasizes that this is not investment advice but rather his personal perspective.
Personal History with LVMH Stock
The speaker shares his personal history with LVMH stock, recalling his initial purchase of two shares in May 2019 and their subsequent sale. He explains that he bought them without a clear understanding of the company and later sold them. He mentions that the stock is currently down nearly 50% from its high point and that he had discussed it in previous videos around October-November 2024 when it was over €600.
Updated Analysis and Investment Threshold
The speaker reveals that his updated analysis suggests a price of under €517 is starting to look interesting. He clarifies that the video will focus primarily on quantitative analysis, with a reminder to refer to his October 2024 video for a more detailed qualitative assessment of the business. He also mentions that he updates his figures regularly in the member area and encourages viewers to check out the latest videos.
LVMH Overview and Stock Performance
LVMH is the world's leading luxury goods company with over 70 brands. The video transitions to discussing the stock's performance, noting the significant correction and its approach to pre-March 2020 levels. The speaker reiterates his strategy of patience, waiting for the price to reach his desired level before investing. He acknowledges that the correction is happening for valid reasons, which will be explored in the numbers.
Revenue Analysis: Stagnation and Long-Term Growth
The analysis begins with a look at LVMH's revenue, noting a decline in the 12-month rolling figures and stagnation over the past five semesters. While recent figures show a slight uptick, the overall trend is downward. However, a longer-term view reveals a compound annual growth rate of nearly 10% over the past decade, indicating a strong historical growth trend.
Margin Analysis: Gross and Net Margins
The video then examines LVMH's margins, highlighting the importance of gross margins in the luxury sector due to the high pricing power. While gross margins have compressed slightly from 68.85% to 65.27%, they remain very high. The company's net margin is a little over 12%, slightly below the historical median of 13.80%, reflecting the challenges in the sector.
Cash Flow and Dividend Analysis
Despite the revenue difficulties, LVMH is maintaining positive cash flow margins, indicating a strong self-financing capacity. The company pays a dividend, distributing over 50% of its cash flow. However, the annual increase in the dividend has slowed, reflecting management's awareness of the business challenges. The company's free cash flow remains positive, and while it has significant long-term debt, it is manageable.
Management Quality and Financial Decisions
The speaker praises LVMH's management for making sound financial decisions, such as not raising debt to pay dividends. He believes that the numbers reflect the quality of management, even during a difficult period. The company's long-term focus is evident in its cash flow management and dividend policies.
Valuation Ratios and Historical Context
The video shifts to valuation ratios, comparing LVMH's current ratios to their historical medians. The analysis reveals that the company was very expensive for the past 2-3 years, with price-to-turnover, PER, and price-to-cash flow ratios significantly above their medians. The compression of these ratios reflects the market's recognition of the challenges facing the company.
Live Analysis of Turnover and Share Price
The speaker conducts a live analysis of LVMH's turnover and share price, demonstrating how the decline in turnover in late 2023 and early 2024 coincided with the start of the stock's major decline. He emphasizes the importance of looking at valuations and estimating future performance, rather than simply relying on past growth.
Updated Figures and Price to Pay
Using his updated figures, which incorporate a drop in turnover for 2024 and a stagnation in 2025, the speaker arrives at a price to pay of a little over €500. He notes that at the current price of €464, he is no longer shocked by the valuation. He reiterates the importance of conducting one's own analysis and writing it down to learn from both successes and failures.
Conclusion: Qualitative Analysis and Future Outlook
The video concludes by emphasizing the importance of qualitative analysis in addition to the quantitative analysis presented. Investors must form their own opinions on the future profitability of the luxury sector, the economic environment in Asia, and the risks associated with management succession and brand image. While the stock price has corrected significantly, the future depends on the return of growth and the maintenance of margins.
Final Thoughts and Program Promotion
The speaker expresses his enjoyment in making the video, highlighting the challenges facing LVMH and the management's efforts to navigate them. He reiterates that while the decline may not be over, he is less worried than he was during the peak valuation period. He concludes by promoting his program, which offers further training and access to his portfolio and analyses.
