Luxottica, Morgan Stanley Thinks Stock is Undervalued

According to Morgan Stanley, the Group that operates in the entire range of financial instruments at international level, Luxottica stock is undervalued and could go up by 25%. A May 21 report in fact fixed a price of 13.7 euros.

In the opinion of the analysts, the Agordo-based company is the biggest and most profitable world operator in the sector given that it can boast an 18% return on equity for 2002, a pre-tax margin of 15%, and a net earnings/billings ratio of 10% based on 2003 estimates.

The share's good growth potential in the long term derives from the good quality of the Group's franchising network and by the 50% drop in price over the last 12 months. At the moment, it is exchanged with a p/e (price/earnings) ratio of 14.6 and an ev/ebidta ratio (earnings/gross operating income) of 8.4 based on estimates for 2004.

The short-term situation is still difficult: current estimates put the average dollar/euro exchange rate at 1.10 but a further weakening of the US currency could mean that expected results will be revised down. The picture should improve in 2004 to give a 7% growth in earnings per share (0.69 euros per share).