PANDORA A/S (PNDORA.CO)

A Danish luxury brand jewellery company with high 35%+ return on capital, buybacks and steady growth selling at a 22.5x P/E, 14.5x EV/EBIT and ~36% below its intrinsic value.

1. Key Facts

Description: Pandora is a Danish company that designs, manufactures and markets hand-finished and contemporary jewellery to individual customers. The company is based in Copenhagen, Denmark and was founded in 1982. The company sells through 2 main segments (Core and Fuel with more), each divided into 3 product categories (Core: Moments, Collabs, ME; Fuel with More: Timeless, Signature, Lab-grown Diamonds).

Track record: Over the last 10 years Pandora compounded revenue at a 10% CAGR (7% over the last 5). It has also grown its NOPAT from 4,005 million DKK in 2015 to 5,349 million DKK in 2023. Its ROIC oscillates in the 35% and 50% range. It’s a steady compounder with an insanely high return on capital. It’s just gone through a successful turnaround and the future seems bright.

Market cap: As of the 31st of December 2024, its market cap is 105 billion DKK (~$14.5billion). It has grown 42% since January 1, 2024, from 926 to 1,317 DKK per share. It is also ~45% up from its 52-week low.

Valuation: PNDORA.CO trades at a TTM P/E of 22.47x (5-year average of ~17x), EV/EBIT of 14.5x (5-year average of 13x) and at a % discount to a conservatively calculated intrinsic value.

2. Business Overview

Pandora sells what it refers to as “accessible luxury” hand-finished by craftspeople from high-quality materials. The accessible jewellery market differs from the first thing that comes to mind when you mention jewellery, at least to me, with hundreds or thousands of pounds for a diamond wedding ring. However, Pandora’s products are not the Gucci of jewellery at all. They are often quite affordable with rings selling below the £100 mark. They are premium enough to give Pandora a luxury premium feeling to its brand and the high margins (Financials), but not so premium as to make it a very high-end product. It’s the Lexus of jewellery, not Ferrari. For example, 47% of Pandora rings are priced in the £50-100 range and 78% are below £100.

Segments

The products are divided into 2 segments: “Core” and “Fuel with more”. Core accounts for 78% of revenue and represents Pandora’s original product lines it specialised in, those being charms and carriers, which are typically small decorative pieces of jewellery people put in their earrings, necklaces, bracelets, etc. Fuel with more accounts for 22% of revenue and includes new brands and ranges that aren’t as mature as Core. This includes their signature and lab-grown diamond ranges. Fuel with more range has grown as a part of the total revenue in 2022 (from 20% to 22%).

Pandora Moments is the classic and oldest Pandora range, which accounted for 65% of revenue. It primarily includes small customisable charm bracelets that Pandora is best known for. Collabs are collaborations with various brands like Game of Thrones, Marvel, Disney or Netflix (Stranger Things, etc) or with artists like Keith Haring. Collab collections are seasonal and limited and new drops come and go. Collabs account for 9.5% of total revenue. Pandora ME is another core collection that emphasises individuality and self-expression. It includes mico jewellery, typically micro charms and bracelets and accounts for 3% of revenue.

Fuel with more includes Pandora Timeless, which is a range focused on elegance and simplicity and most of its jewellery is fairly minimalistic and classy and as such is supposed to last for a long time and always be adequate (timeless). It accounts for 17% of total revenue and a large majority of Fuel with more. Pandora Signature is as the name suggests, a Pandora-branded range that blends contemporary and old school. It accounts for 4% of total revenue. The last product range is the Lab-grown Diamonds range with jewellery made exclusively from diamonds that are lab-grown and identical to natural ones. They are more ethical, environmentally friendly, and cheaper to produce and account for 1% of revenue (started in 2022)

Segment Revenue Split

(Game of Thrones x Pandora collab with a Lannister-themed gold ring)

Brief History