Investment Analysis and Asset Selection in Luxury Goods Sector: A Case Study of Burberry, Hermes and LVMH

Abstract

This paper conducts a detailed analysis of potential investments in three companies which are major players in the luxury goods industry: Burberry, Hermes, and LVMH. The analysis begins by evaluating risk through key indicators such as market capitalization, beta, debt ratio, and current ratio. This is then followed by an analysis of how profitable each company is using ROA (Return on Assets) and ROE (Return on Equity). Furthermore, this paper is then followed by market ratios which can be used to identify potential undervalued opportunities such as the PE (Price to Earnings) and PB (Price to Book), and PEG ratios. Beyond fundamental metrics, this paper also integrates qualitative factors such as insider buying and ‘Smart Money’ trades; these movements often provide essential insights into a company’s future performance. The findings reveal that each company presents a unique investment profile suitable for different types of investors. For example, the data suggests that Burberry and LVMH would be appealing to valuation investors, as, using the DCF model, their intrinsic value is higher than their current market price. On the other side, Hermes is a favourable choice for ratio and smart money investors, while momentum investors would find Burberry and Hermes appealing. This serves as a comprehensive guide for potential investors in the luxury goods sector to make informed decisions aligned with their specific financial goals and risk tolerance.