Case Study Integrated Valuation: Inditex

Dirk Schoenmaker and Willem Schramade
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Willem Schramade: Nyenrode Business University

Chapter 11 in Corporate Finance for Long-Term Value, 2023, pp 289-321 from Springer

Abstract: Abstract This chapter applies the tools of the previous chapters to a particular company, Inditex, the largest fast fashion company in the world. The fast fashion industry faces major social (S) and environmental (E) challenges. Moreover, since the industry is characterised by high levels of outsourcing, those challenges tend to be hidden down the supply chain. The case study answers questions such as: how to calculate the integrated value of a company? Which company-reported data to use? How to fill the gaps from missing data in company reporting? We connect the company’s business model and purpose to its external impacts and transition challenges. This allows us to value on environmental (E), social (S), and financial (F) factors. We compute the company’s integrated value (IV) by summing FV, SV, and EV in several ways. The company’s IV turns out to be positive overall, but both positive SV and negative SV and EV turn out to be much larger than FV, which shows the importance of not netting. The large negative values need to be addressed: to be reduced and ideally eliminated. We therefore explore integrated value creation over time; how it can be improved; and how to communicate it to investors.

Keywords: Business model; Capex; Cost of equity; Cost of debt; Customer value proposition; Double materiality; Depreciation; EBITDA; Enterprise value; Environmental value (EV); E flows; External impacts; Financial value (FV); Integrated value (IV); Integrated value creation; Integrated valuation; Investor presentation; Inward perspective; IPO; Key resources and processes; Management quality; Margins; Materiality; Materiality assessment; Monetisation factor; Netting; Outward perspective; Purpose; Profit formula; Quantification; ROA; Sales-to-assets; S flows; Social value (SV); Stakeholders; Stakeholder impact map; Total assets; Transition; Transition scenarios; Transition valuation scenarios; True prices; X-curve; Valuation; Value creation; Value creation profile; Value destruction; Value driver; Weighted average cost of capital (WACC) (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-031-35009-2_11

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DOI: 10.1007/978-3-031-35009-2_11

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