Hermès HESAY is a very interesting brand. It relies solely on craftsmanship and savoir-faire to manufacture its goods. It all boils down to the materials and skills working around those materials, cutting and stitching are more than simple tasks. They are the difference between a bag that costs thousands of dollars and garbage. It is no wonder that a used Birkin bag resells for a price higher than the original acquisition price. This is scarcity at play, and careful craftmanship is the proof-of-work that makes it legit.

The same goes for the stores that sell Hermès items. The company owns most stores, and there is rigorous training for the sales staff.

The downside to this strategy is that increasing scale is not easy and it necessitates a lot of planning ahead in terms of training staff and securing materials.

The bright side is that the company controls prices with extreme effectiveness, which is reflected in the revenue growth and margins. The 32% profit margin is a testament to the company’s business model.

Thanks to this, the balance sheet is in stellar form.

The main issue for investors is the valuation. The current PS and PE ratios suggests the company is almost priced to perfection.

Looking at estimates, we can see the company deriving $20.38 billion by 2026, with a 30% profit margin and enjoying a 50x earnings multiple could value the company at $291 per share. That said I would consider buying at any price below $200. We will see if it ever gets there.

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