Ermenegildo Zegna (ZGN) AI Stock Analysis

• Market Cap: $3.24B
• Dividend Yield: 1.62%
• Average Volume (3M): 1.05M
• Price to Earnings (P/E): 24.0
• Beta (1Y): 1.09
• Revenue Growth: 2.26%
• EPS Growth: -37.52%
• Country: US
• Employees: 7,185
• Sector: Consumer Cyclical
• Sector Strength: 67
• Industry: Apparel - Manufacturers
• EPS (TTM): 0.33
• Shares Outstanding: 252,579,880
• 10 Day Avg. Volume: 1,059,745
• 30 Day Avg. Volume: 1,053,617
• PEG Ratio: 0.79
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $9.22
• Price Target Upside: 16.12% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 5

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

Global Performance

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

Market Expansion

Zegna has expanded through acquiring two international luxury brands, Thom Browne and Tom Ford Fashion, enhancing its luxury market presence.

Revenue Growth

Zegna reported organic revenue growth of 4% in the fourth quarter, with trends across all brands and regions improving and exceeding expectations.

Negative Factors

China Market Weakness

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

Investment Year Impact

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

Wholesale Decline

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

Ermenegildo Zegna Business Overview & Revenue Model

Company Description

Ermenegildo 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 Money

Ermenegildo 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

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

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

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.

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

Ermenegildo Zegna Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 7.94
• 50DMA: Positive
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

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 7.94 is above the 20-day moving average (MA) of 7.08, above the 50-day MA of 7.57, and below the 200-day MA of 8.66, indicating a neutral trend. The MACD of 0.10 indicates Negative momentum. The RSI at 61.87 is Neutral, neither overbought nor oversold. The STOCH value of 92.47 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ZGN.

Ermenegildo Zegna Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RL	76 Outperform	$13.71B	20.23	27.57%	1.50%	5.23%	24.63%
PVH	74 Outperform	$3.74B	6.74	11.67%	0.21%	-6.13%	-2.63%
LEVI	70 Outperform	$6.28B	17.86	18.03%	3.17%	4.63%	187.50%
ZGN	66 Neutral	$3.24B	23.98	8.89%	1.62%	2.26%	-37.52%
COLM	61 Neutral	$3.53B	16.77	12.01%	1.85%	-3.35%	-6.09%
Sector *	60 Neutral	$6.86B	11.74	3.14%	4.15%	2.37%	-21.95%
VFC	53 Neutral	$4.51B	―	-16.13%	3.08%	-8.42%	57.91%