Ermenegildo Zegna (ZGN) AI Stock Analysis

• Market Cap: $3.31B
• Dividend Yield: 1.74%
• Average Volume (3M): 883.71K
• Price to Earnings (P/E): 24.5
• Beta (1Y): 1.18
• Revenue Growth: 2.26%
• EPS Growth: -37.52%
• Country: US
• Employees: 7,185
• Sector: Consumer Cyclical
• Sector Strength: 75
• Industry: Apparel - Manufacturers
• EPS (TTM): 0.24
• Shares Outstanding: 252,579,880
• 10 Day Avg. Volume: 889,286
• 30 Day Avg. Volume: 883,706
• PEG Ratio: N/A
• Price to Book (P/B): 0.00
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 0.89
• Enterprise Value/Revenue: 1.51
• Enterprise Value/Gross Profit: 2.27
• Enterprise Value/Ebitda: 11.31
• 1Y Price Target: $9.48
• Price Target Upside: 16.75% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 5

• Rating: 65 Neutral
• Price Target: $9.00 ▲(10.84% Upside)

Zegna's overall stock score is driven by strong financial performance with robust revenue growth but tempered by concerns over declining profit margins and increased leverage. Bearish technical indicators and high valuation contribute to a cautious outlook, while the earnings call revealed both strategic strengths and regional challenges.

Positive Factors

Direct-to-Consumer Growth

DTC operations showed solid progress with a year-over-year organic growth of 7.5%.

Leadership Change

Sam Lobban was announced as the new CEO for Thom Browne, and his execution abilities are viewed positively.

Valuation and Earnings Potential

Despite lower estimates, Zegna is considered not expensive for its resilience, and a 'BUY' rating is reiterated.

Negative Factors

China Market Performance

China experienced a decline of 17% year-over-year, with management acknowledging lower traffic and a slower recovery.

Geopolitical and Consumer Confidence Risks

Volatile consumer confidence and luxury industry trends in China and the US limit growth potential for Zegna.

Wholesale Channel Challenges

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

Ermenegildo Zegna Business Overview & Revenue Model

Company Description

Ermenegildo Zegna (ZGN) is a renowned Italian luxury fashion house established in 1910, specializing in the production of high-end menswear, accessories, and textiles. The company is acclaimed for its craftsmanship, innovation, and sustainable practices, offering a diverse range of products including suits, casual wear, leather goods, shoes, and fragrances. Zegna operates globally with a strong retail presence, catering to discerning customers seeking refined and elegant apparel.

How the Company Makes Money

Ermenegildo Zegna generates revenue primarily through the sale of its luxury menswear and accessories. The company operates a network of directly-operated stores, as well as through wholesale partnerships with high-end department stores and specialty retailers worldwide. A significant portion of its income comes from its in-house designed and manufactured products, which are characterized by high-quality materials and craftsmanship. Zegna also leverages its prestigious brand to establish strategic partnerships and collaborations, further enhancing its market presence and revenue potential. Additionally, the company emphasizes sustainability and innovation in its production processes, which not only appeals to eco-conscious consumers but also helps in maintaining operational efficiency and cost management.

Ermenegildo Zegna Financial Statement Overview

Summary

Ermenegildo Zegna shows strong revenue growth and gross margins, but declining net profit margin and increased leverage are concerning. Cash generation is stable, but higher capital expenditures have impacted free cash flow.

Income Statement

Ermenegildo Zegna has demonstrated a steady revenue growth trajectory, with total revenue increasing from $1.49 billion in 2022 to $1.95 billion in 2024, showing a notable 30% growth over two years. The gross profit margin improved to 66.6% in 2024, indicating strong cost management. However, the net profit margin has decreased to 3.96% in 2024 from 6.38% in 2023, suggesting rising expenses or lower operational efficiency. The EBIT margin is stable at 8.57%, but the declining EBITDA margin from 20.63% in 2023 to 20.87% in 2024 indicates pressure on operating profitability.

Balance Sheet

The company's debt-to-equity ratio has increased to 1.13 in 2024, reflecting higher leverage, which could pose risks if earnings do not grow as expected. Return on equity (ROE) dropped to 8.41% in 2024 from 14.46% in 2023, showing reduced profitability for shareholders. However, the equity ratio has improved to 32.31% in 2024 from 30.37% in 2023, indicating a healthier balance between debt and equity financing.

Cash Flow

Ermenegildo Zegna's operating cash flow increased slightly to $279 million in 2024, reflecting stable cash-generating operations. The free cash flow, however, dropped to $153.6 million in 2024 from $197.5 million in 2023, due to higher capital expenditures. The free cash flow to net income ratio remains strong at 1.99, suggesting good cash conversion from earnings.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	1.95B	1.90B	1.49B	1.29B	1.01B
Gross Profit	1.30B	1.22B	743.59M	925.13M	698.77M
EBITDA	406.23M	392.95M	288.99M	71.14M	151.03M
Net Income	77.08M	121.53M	51.48M	-127.66M	-46.54M
Balance Sheet
Total Assets	2.83B	2.77B	2.43B	2.46B	2.42B
Cash, Cash Equivalents and Short-Term Investments	296.13M	387.03M	572.99M	800.17M	630.94M
Total Debt	1.04B	996.35M	914.56M	1.07B	1.08B
Total Liabilities	1.85B	1.87B	1.69B	1.81B	1.77B
Stockholders Equity	916.12M	840.29M	678.95M	601.21M	601.76M
Cash Flow
Free Cash Flow	153.60M	197.50M	73.10M	186.83M	31.75M
Operating Cash Flow	279.13M	275.38M	146.40M	281.15M	70.91M
Investing Cash Flow	-126.01M	21.79M	-57.34M	-82.00M	92.57M
Financing Cash Flow	-234.53M	-250.49M	-297.00M	-64.11M	-49.05M

Ermenegildo Zegna Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 8.12
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ZGN, the sentiment is Negative. The current price of 8.12 is below the 20-day moving average (MA) of 8.35, below the 50-day MA of 8.58, and above the 200-day MA of 8.09, indicating a bearish trend. The MACD of -0.21 indicates Positive momentum. The RSI at 43.72 is Neutral, neither overbought nor oversold. The STOCH value of 83.47 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ZGN.

Ermenegildo Zegna Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
LEVI	78 Outperform	$8.20B	20.48	20.93%	2.56%	2.90%	182.72%
RL	77 Outperform	$17.60B	23.18	32.55%	1.17%	9.61%	21.14%
Sector *	67 Neutral	¥277.48B	14.89	6.81%	2.50%	5.07%	-22.68%
ZGN	65 Neutral	$3.31B	24.49	8.89%	1.74%	2.26%	-37.52%
PVH	65 Neutral	$3.55B	10.41	8.31%	0.20%	-3.63%	-37.24%
COLM	64 Neutral	$2.89B	13.42	12.93%	2.28%	0.81%	4.86%
VFC	50 Neutral	$4.77B	56.22	7.83%	2.78%	-7.41%	―