Ferrari - magic behind the brand and numbers!
Mahesh Dumbre
Serving entrepreneurs with capital, network and advisory | ex Tata Sons | Teacher
Ferrari's tagline "We are the Competition" reflects the company's focus on innovation, excellence, and pushing the boundaries of automotive engineering.
Over the past 5 years, Ferrari has beaten the market by 2.5x, with most of the outperformance happening in 2023.
What's all this about?
The answer shouldn't be surprising.
Ferrari is a growth business.
Sales and profits have been growing over the past 10 years, with an acceleration in 2022/2023.
A stock is a share of a business. If the business grows, the stock price will grow.
If the pace of growth accelerates, the stock price growth will accelerate.
Unit sales grew only 3% in 2023, but revenues grew 17%.
This means ASP (Average Sale Price) rose by 14%.
Due to operating leverage and cost control, profits rose almost twice as fast as sales, increasing earnings per share by +36%.
When sales, profits and earnings per share grow faster than the market average, the stock price will beat the market. It's a mathematical law.
Great businesses are everywhere. Ferrari is a leader in the sports car niche. They're not competing with Toyota or Volkswagen or Tesla. Their brand power gives them pricing power and extremely high operating profit margins (28%) for a car producer.