Strategic and Financial Valuation of Inditex

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Executive summary
The main objective of this thesis is to determine the value of Inditex´s share by conducting own valuation. Over the recent years, Inditex has demonstrated remarkable growth and continuously been expanding its operations year after year. Furthermore, Inditex has had a continuous increase in share value since being publicly listed in the Madrid stock exchange in 2001, until mid of 2007. However, from 2007 until today, the share price has plunged from 51 EUR to 25 EUR. Experts seem to disagree whether the huge decline is caused by external factors such as the current economic meltdown or internal factors such as a decrease in growth and lower expansion.

The valuation is based on thorough strategic and financial analysis in which I incorporate theories and models such as, PEST. Porter´s five forces, Porter´s generic strategies and Porter´s value chain, and CAPM. Furthermore, I analyze the firm´s historic performance, in which I base my future predictions.

The valuation is conducted by using DCF approach. My own estimated value of Inditex, on first of March, is 40 EUR per share. The observed share price on the IBEX stock exchange on the same date was around 30 EUR. Thus, my own estimated valuation was approximately 33 percent higher than market expectation.

Due to current economic recession and many uncertainties in the future, I also perform valuation based on different scenarios, best-case and worst-case scenario where I implement all possible risks and opportunities identified in strategic and financial chapters.

Table of Contents
1. INTRODUCTION ............................................................................................................................................. 2 1.2 PROBLEM STATEMENT ...............................................................................................................................................3 1.3 THESIS STRUCTURE....................................................................................................................................................3 1.4 DISCUSSION OF MARKET EFFICIENCY AND VALUATION.......................................................................................................5 1.5 DELIMITATION .........................................................................................................................................................6 1.6 STUDY DESIGN .........................................................................................................................................................7 1.7 CRITIQUE ................................................................................................................................................................8 2. INDITEX ......................................................................................................................................................... 9 2.1 HISTORY .................................................................................................................................................................9 2.2 SHARE INFORMATION ................................................................................................................................................9 2.3 OWNERSHIP, CORPORATE GOVERNANCE, AND PRINCIPAL-AGENT CONFLICT ........................................................................10 2.4 INDITEX´S PRODUCT PORTFOLIO .................................................................................................................................12 3. STRATEGY ANALYSIS .................................................................................................................................... 13 3.1 MACRO-ENVIRONMENTAL ANALYSIS ...........................................................................................................................13 3.2 INDUSTRY ANALYSIS...
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