InditexDCF Valuation

Corporate Finance · Equity Valuation

Inditex

Discounted cash flow valuation

What is one of the world's largest fashion retailers really worth? This model rebuilds Inditex's value from its published annual reports — every assumption adjustable, every number sourced.

Net sales and free cash flow · EUR bn

  • Net sales
  • Free cash flow

Free cash flow after store rents, derived in chapter 02. FY21 = Feb 2021 – Jan 2022.

Ticker
ITX
Listing
Bolsa de Madrid
Currency
EUR
Fiscal year
1 Feb – 31 Jan
Fair value / share
—
Base case of the DCF model, 1 Oct 2026 (chapter 05).
Share price
—
Closing price on 1 Oct 2026, Bolsa de Madrid.
Upside / downside
—
Fair value compared with the share price.
WACC
—
Discount rate, built up in chapter 04.

The company

The business model on one screen — and why it matters for the valuation.

Net sales FY2025
€39.9bn
+3.2% on the prior year, +7.0% at constant currency.
Stores
5,460
103 fewer than a year earlier, while selling space grew 1.5% — fewer, larger stores.
Online sales
€10.7bn
About 27% of net sales, +4.8% on the prior year.
Net cash
€11.0bn
Cash and short-term investments, practically no bank debt.

Source: Inditex FY2025 Results, pp. 2–5.

Net sales by concept · FY2025 · EUR m

The Zara concept brings in seven of every ten euros. Source: FY2025 Results, p. 4.

Net sales by region · FY2025

Store and online sales. Source: FY2025 Results, p. 4.

Why it matters for the valuation

  1. High, stable margins. Inditex designs in-house, sources a large part of production close to Spain and restocks stores during the season. Selling more at full price shows in a gross margin of 58% — and stable margins make future cash flows easier to forecast.
  2. Suppliers finance the stock. Operating working capital is negative (−€4.2bn): customers pay at the till, suppliers are paid later. Inditex therefore needs almost no capital of its own to carry its inventory.
  3. Cash instead of debt. With €11.0bn of net cash, the company is financed almost entirely by equity. In the valuation the cash is added on top of the operating business, and the discount rate is essentially the cost of equity.
  4. Stores are rented. Rents of €1.8bn a year appear under IFRS 16 as lease liabilities (€5.9bn). This model treats rent as an operating cost, the way Inditex itself reports free cash flow.

Historical financials

Five years of reported figures, condensed into free cash flow.

From EBITDA to free cash flow · EUR m

Reading the bridge

A valuation needs cash, not accounting profit. The bridge starts at EBITDA — operating profit before depreciation — and subtracts everything the business must pay to keep running and growing: taxes on its operating profit, the rent for its stores, investment in stores, logistics and technology, and any cash tied up in working capital.

What is left — 4,123 million euros in FY25 — is free cash flow to the firm: the cash available to all providers of capital. Its future values, discounted to today, are the core of the DCF.

Cross-check: Inditex reports €4,686m for FY2025. The difference comes from three items that do not belong to the operating business — interest earned on the cash pile, the result of associates, and actual tax payments being lower than the tax charge — plus other non-cash adjustments.

Forecast

Five-year projection driven by assumptions you can change.

Assumptions · base case

Held at FY2025 levels: depreciation & amortisation 8.2% and lease payments 4.6% of sales.

Net sales FY2030
—
Free cash flow FY2030
—
Avg. FCF growth per year, FY25–30
—

Free cash flow to the firm · EUR m

  • Reported
  • Forecast

FY25 reported, FY26–FY30 forecast (E). The base case is my own estimate, anchored on the FY2025 accounts and Inditex's guidance for 2026 (half-year results, 9 Sep 2026).

Cost of capital

The return investors demand for bearing the risk of Inditex’s cash flows — built up step by step with the CAPM.

Inputs · CAPM

Cost of equity
—
Financed by equity
—
WACC
—

From risk-free rate to WACC

Higher bond yields raise the WACC and lower the value of every future euro — which is why share prices often fall when yields rise.

Cost of equity = risk-free rate + beta × equity risk premium —

Why WACC equals the cost of equity here: Inditex has no financial debt — it holds €11.0bn of net cash. Leases are not counted as debt either, because store rents are already deducted from the free cash flow (chapter 02). Counting them twice would understate the value.

Valuation

From discounted cash flows to a fair value per share.

Inputs · valuation

WACC chapter 04
—
Net cash 31 Jan 2026
—
Financial investments incl. associates, 31 Jan 2026
—
Shares FY2025, million
—
Dividend paid 4 May 2026, per share
—
Share price close, 1 Oct 2026
—

Sales, margins and capex come from chapter 03, the discount rate from chapter 04 — change them there and this chapter updates.

Fair value per share
—
Share price
—
Upside / downside
—

From enterprise value to equity value · EUR bn

  • Model value
  • Result
Value per share — — Rolled forward from 31 January to 1 October 2026 at the cost of equity, less the dividend paid in May.

Peers

Trading comparables: what the market pays for Inditex's closest listed competitors — and what that implies for Inditex.

Peers in the median

Inditex EV / EBIT
—
At €53.06 per share
Peer median EV / EBIT
—
Inditex premium to peers
—
On EV / EBIT

Latest full fiscal year before 1 October 2026 and closing prices on 1 October 2026. Multiples are ratios, so currencies do not matter. Net debt excludes lease liabilities, as in the DCF. Hover or tap a figure for its source.

Value per Inditex share by method

Peer values apply the median multiple to Inditex's FY2025 EBIT (plus net cash) or earnings per share.

Why Inditex trades at a premium

Inditex earns an EBIT margin of 20% — more than twice H&M's 8% — holds net cash and grows faster than H&M. Investors pay more for each euro of profit when returns are higher and steadier. Only Fast Retailing, the owner of Uniqlo, is valued even more richly.

EV / sales is shown in the table but not used for a value: with margins between 3% (Zalando) and 20% (Inditex), a euro of sales is worth very different amounts across these companies.

Sensitivity

How much the answer depends on the assumptions.

Apply a scenario to the whole model

Probability-weighted value
—
Range bear – bull
—
Per share, today
Share price
—
Close, 1 Oct 2026

Scenarios · fair value per share

    Sensitivity · fair value per share in €

    Rows: WACC. Columns: terminal growth g. The framed cell is the current setting; highlighted cells lie above the share price. Uses the forecast from chapter 03.

    What the share price implies

    A reverse DCF: each figure is the one assumption that — with everything else unchanged — makes the model value equal to the share price of €53.06.

    Terminal growth needed
    —
    EBIT margin FY2030 needed
    —
    WACC needed
    —

    Method & sources

    Assumptions, simplifications and where every number comes from.

    Approach

    1. Free cash flow to the firm, after rents. EBIT less taxes at the effective rate, plus depreciation, less lease payments, capital expenditure and the working-capital cash flow. Store rents are treated as an operating cost — the way Inditex reports its own free cash flow — so lease liabilities are not counted as debt. The IFRS 16 alternative (rents added back, €5.9bn of lease liabilities deducted as debt) should arrive at a similar value if applied consistently.
    2. Five explicit years, then a terminal value. FY2026–FY2030 are driven by sales growth, EBIT margin, capex and working capital as a share of sales; FY2026 capex follows company guidance. After FY2030 the Gordon growth formula takes over.
    3. Discount rate from the CAPM. 10-year Bund yield, a global sector beta for specialty retail and the implied equity risk premium (Damodaran). With no financial debt, the WACC equals the cost of equity.
    4. Timing. Cash flows are discounted at each fiscal year-end from 31 January 2026, the date of the last audited balance sheet. The value per share is then rolled forward to 1 October 2026 at the cost of equity, less the dividend paid in May 2026.
    5. Equity bridge. Enterprise value plus net cash and financial investments (book value) at 31 January 2026. No minority interests; FY2025 share count, no dilution.
    6. Cross-check with peers. Trading comparables in chapter 06: the median EV / EBIT and P / E of H&M, Fast Retailing, Next and Zalando, from their latest annual figures and closing prices on 1 October 2026, applied to Inditex's FY2025 EBIT and earnings per share.
    7. Ranges, not a point. Scenarios and the WACC × growth table in chapter 07 show how far the value moves; the reverse DCF shows what the share price already assumes.

    Simplifications

    Sources

    Company reports

      Market data

        Peer reports

          About & my role

          Portrait of Moritz Sturm
          Moritz Sturm

          Why I built this

          I study International Business Management at OTH Regensburg and spend 2026/27 at Cámarabilbao University Business School. I want to bring finance skills into my internships, not just theory from lectures — so I applied them to a real case: a full valuation of a listed company, from the annual reports to a fair value per share.

          My role

          I conceived and led this project end to end. I selected Inditex and the valuation approach, decided how the story unfolds — from the business model to sensitivities and peer multiples — and directed every iteration with Claude Code, my AI pair programmer. I worked through the finance behind the model, had the finished tool reviewed from a recruiter's and a designer's perspective, and decided what to sharpen. Working with AI this way is part of what this project shows.

          Built with Claude Code · every figure sourced to document and page · no frameworks, no tracking · not investment advice.