Ermenegildo Zegna (ZGN) AI Stock Analysis

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Ermenegildo Zegna

(NYSE:ZGN)

Rating:66Neutral

Price Target:―

Ermenegildo Zegna's stock reflects a mix of robust revenue growth and strategic investments, countered by concerns over profitability and leverage. The technical indicators suggest a bearish trend, while valuation metrics indicate a slight overvaluation. Earnings call insights reveal strategic positioning and regional strengths, though challenges persist in some segments and regions. Overall, Zegna's strategic initiatives and growth prospects are promising, but financial and market challenges warrant a cautious approach.

Positive Factors

Market Performance

Zegna continues to enjoy strength in developed markets, with EMEA and US DTC up double-digit.

Product Launch

Zegna has seen improving trends globally, supported by the latest product drop and launch of the new signature shoe called Mocassin.

Valuation

Zegna trades at 1x EV/Sales and 15x P/E, which makes it one of the cheapest luxury names, considering a 15% 3yr EPS CAGR.

Negative Factors

Investment Concerns

The company is in a Hold rating due to FY25 being an investment year, which could limit near-term upside.

Regional Weakness

Greater China remains the weakest part of the business at -12% organic, weighed by particular softness in Hong Kong.

Wholesale Challenges

Wholesale declined by -19%, with Thom Browne at -48%.

Ermenegildo Zegna (ZGN) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$3.43B

Dividend Yield1.53%

Average Volume (3M)988.63K

Price to Earnings (P/E)25.4

Beta (1Y)1.08

Revenue Growth2.26%

EPS Growth-37.52%

CountryUS

Employees7,185

SectorConsumer Cyclical

Sector Strength74

IndustryApparel - Manufacturers

Share Statistics

EPS (TTM)0.24

Shares Outstanding252,579,880

10 Day Avg. Volume945,208

30 Day Avg. Volume988,635

Financial Highlights & Ratios

PEG Ratio-2.97

Price to Book (P/B)2.09

Price to Sales (P/S)0.00

P/FCF Ratio12.72

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$9.22

Price Target Upside9.63% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering5

Ermenegildo Zegna Business Overview & Revenue Model

Company DescriptionErmenegildo Zegna (ZGN) is a leading global luxury fashion brand renowned for its high-quality menswear and accessories. Established in 1910 in Trivero, Italy, the company specializes in creating premium suits, outerwear, knitwear, shirts, and leather goods, all crafted with meticulous attention to detail. Zegna is committed to sustainability and innovation, incorporating advanced technologies and sustainable materials into its product lines. With a strong heritage in textile manufacturing, Zegna also produces high-end fabrics and textiles for its own use and for other luxury brands.

How the Company Makes MoneyErmenegildo Zegna generates revenue through multiple streams, primarily from the sale of luxury menswear and accessories. The company operates a network of retail stores, including flagship locations in major cities around the world, and an e-commerce platform that extends its reach globally. Zegna's revenue model includes wholesale distribution to high-end department stores and specialty retailers, as well as direct-to-consumer sales through its own retail outlets and online channels. The company also benefits from its textile manufacturing operations, supplying high-quality fabrics to other luxury brands. Strategic partnerships and collaborations with other fashion and lifestyle companies further enhance Zegna's brand visibility and contribute to its earnings.

Ermenegildo Zegna Financial Statement Overview

Summary

Ermenegildo Zegna enjoys a robust financial position with strong revenue and profit growth, improved margins, and efficient cash flow management. The company has successfully enhanced its profitability and operational efficiency, while maintaining a balanced approach to leverage. Continued focus on sustaining growth, managing debt, and expanding cash flows will be critical for long-term success.

Income Statement

Very Positive

Ermenegildo Zegna's income statement shows a strong performance with a significant increase in total revenue from 2022 to 2023, marking a growth rate of 27.55%. Gross profit margin improved substantially from 49.82% in 2022 to 64.28% in 2023, indicating enhanced cost efficiency. The net profit margin rose from 3.45% to 6.38%, reflecting increased profitability. EBIT and EBITDA margins also showed positive trends, which suggest robust operational performance. However, the company needs to maintain this positive trajectory to ensure long-term growth.

Balance Sheet

Positive

The balance sheet of Ermenegildo Zegna indicates a stable financial structure with a moderate debt-to-equity ratio of 1.19 in 2023, slightly down from 1.35 in 2022, showing improved leverage management. The return on equity increased significantly to 14.46% from 7.58%, reflecting better utilization of equity capital to generate profits. The equity ratio remains moderate at 30.37%, suggesting a balanced approach between debt and equity financing. Nevertheless, further reduction in debt might be beneficial to reduce financial risk.

Cash Flow

Very Positive

The cash flow statement reveals strong cash generation capability with a remarkable increase in free cash flow from 2022 to 2023, resulting in a growth rate of 170.12%. The operating cash flow to net income ratio of 2.27 in 2023 indicates efficient cash flow management. The free cash flow to net income ratio is 1.63, showing that the company is generating sufficient cash to cover net income. Continued focus on sustaining cash flow growth will be essential for future investments and dividend payouts.

TTM	Dec 2023	Dec 2022	Dec 2021	Dec 2020	Dec 2019
Breakdown
Income Statement		Total Revenue
1.96B	1.90B	1.49B	1.29B	1.01B	1.32B
	Gross Profit
1.28B	1.22B	743.59M	925.13M	698.77M	931.82M
	EBIT
170.33M	208.15M	147.78M	80.61M	-4.31M	88.64M
	EBITDA
256.65M	392.95M	288.99M	71.14M	151.03M	265.06M
	Net Income Common Stockholders
100.65M	121.53M	51.48M	-127.66M	-46.54M	21.75M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
190.80M	387.03M	572.99M	800.17M	630.94M	595.06M
	Total Assets
698.50M	2.77B	2.43B	2.46B	2.42B	2.64B
	Total Debt
327.78M	996.35M	914.56M	1.07B	1.08B	1.13B
	Net Debt
273.20M	700.07M	660.24M	607.20M	759.43M	922.11M
	Total Liabilities
517.13M	1.87B	1.69B	1.81B	1.77B	1.91B
	Stockholders Equity
181.37M	840.29M	678.95M	601.21M	601.76M	688.77M
Cash Flow		Free Cash Flow
208.99M	197.50M	73.10M	186.83M	31.75M	114.62M
	Operating Cash Flow
288.25M	275.38M	146.40M	281.15M	70.91M	174.12M
	Investing Cash Flow
-120.91M	21.79M	-57.34M	-82.00M	92.57M	83.96M
	Financing Cash Flow
-196.37M	-250.49M	-297.00M	-64.11M	-49.05M	-267.49M

Ermenegildo Zegna Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price8.41

Price Trends

50DMA

7.60

Positive

100DMA

8.03

Positive

200DMA

8.42

Negative

Market Momentum

MACD

0.28

Positive

RSI

58.90

Neutral

STOCH

38.29

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ZGN, the sentiment is Neutral. The current price of 8.41 is above the 20-day moving average (MA) of 8.30, above the 50-day MA of 7.60, and below the 200-day MA of 8.42, indicating a neutral trend. The MACD of 0.28 indicates Positive momentum. The RSI at 58.90 is Neutral, neither overbought nor oversold. The STOCH value of 38.29 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ZGN.

Ermenegildo Zegna Risk Analysis

Ermenegildo Zegna disclosed 45 risk factors in its most recent earnings report. Ermenegildo Zegna reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 1 New Risks

Summary of Risk Factors Q4, 2023

Ermenegildo Zegna Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PVH	76 Outperform	$3.93B	7.77	11.67%	0.18%	-6.13%	-2.63%
RL	76 Outperform	$16.54B	23.61	29.49%	1.20%	5.23%	24.63%
LEVI	75 Outperform	$7.01B	19.96	18.03%	2.93%	4.63%	187.50%
ZGN	66 Neutral	$3.43B	25.37	8.89%	1.53%	2.26%	-37.52%
COLM	63 Neutral	$3.49B	16.30	12.34%	1.88%	-1.69%	-4.01%
Sector *	62 Neutral	$6.84B	11.22	2.83%	3.95%	2.65%	-21.93%
VFC	53 Neutral	$4.68B	―	-2.39%	3.00%	-8.42%	57.91%

* Consumer Cyclical Sector Average

Performance Comparison

ZGN

Ermenegildo Zegna

8.41

-3.88

-31.57%

COLM

Columbia Sportswear

63.80

-17.89

-21.90%

PVH

81.99

-32.62

-28.46%

Ralph Lauren

274.08

95.73

53.68%

VFC

12.00

-0.10

-0.83%

LEVI

Levi Strauss & Co

17.74

-4.20

-19.14%

Ermenegildo Zegna Earnings Call Summary

Earnings Call Date:Mar 27, 2025

(Q4-2024)

% Change Since: 18.79%|

Next Earnings Date:Sep 05, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mix of positive developments, particularly in North America and strategic investments, alongside challenges in the Thom Browne segment and GCR. While the company showed resilience and strategic forward movement, some areas like China and the textile segment faced headwinds.

Q4-2024 Updates

Positive Updates

Q4 2024 Revenue Growth

Q4 2024 revenue grew by 3%, both organic and reported. The Zegna brand grew 7% organically, and the DTC channel grew 8% organically at the group level. North America delivered 15% organic growth.

Strong Performance in North America

North America delivered 15% organic growth, driven by sequential acceleration and better-than-group performance for the Zegna brand.

Strategic Investments and Strengthening

In 2024, the company reinforced talents, strengthened the business division at TOM FORD FASHION, invested in CRM, and enhanced merchandising and retail operations across regions.

Zegna Brand's Product Innovation

The Zegna Vellus Aureum project, showcasing the finest wool textiles, was acclaimed at Men's Fashion Week.

TOM FORD FASHION's Positive Trends

TOM FORD FASHION recorded a 9% organic growth in DTC in Q4, with a strong performance in the U.S. and EMEA.

Negative Updates

Decline in Thom Browne and Textile Segments

Thom Browne segment revenues declined by 4%, and textile performance was negative at -30% organic, largely due to decreasing demand from luxury brands outside the group.

Challenges in Greater China Region (GCR)

GCR revenues declined by 11% in Q4, showing a sequential improvement from Q3 but still facing limited visibility and volatility.

Company Guidance

During the Ermenegildo Zegna Group's call on January 27, 2025, the leadership team, including CEO Gildo Zegna and CFO Gianluca Tagliabue, provided guidance and key metrics for Q4 2024. The group's total revenue grew by 3% organically, with the Zegna brand experiencing a 7% organic growth and the direct-to-consumer channel growing by 8%. The North American region led with a 15% organic growth, supported by a strong performance from the Zegna brand. The group highlighted strategic initiatives such as reinforcing talent, enhancing CRM, and expanding geographic focus on the U.S. and the Middle East. The leadership emphasized a shift towards a more integrated model across corporate functions to drive efficiency. Despite a challenging environment affecting profitability, the group remains committed to long-term brand value enhancement and market expansion, particularly in the U.S. and EMEA for TOM FORD FASHION, and continued investment in the Filiera supply chain for excellence and innovation. Overall, the call focused on the group's strategic positioning and selective investment in key projects to drive future growth.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.