Sanlorenzo: Investment Opportunities in High-End Yachting.

Sanlorenzo is a global leader in luxury yacht manufacturing, known for its custom-built motor yachts and superyachts that reflect Italian craftsmanship, exclusivity, and design. With limited production, a strong brand, and growing demand from ultra-high-net-worth individuals, Sanlorenzo stands out in the world of high-end leisure. The question is: Does this yacht maker deserve a place in your portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do own any shares in Sanlorenzo at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Sanlorenzo, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

Sanlorenzo is an Italian luxury yacht builder founded in 1958, specializing in the design and production of tailor-made motor yachts, superyachts, and sport utility yachts. The company operates through four divisions: Yacht, Superyacht, Bluegame, and the recently acquired Nautor Swan, covering vessels from 13 to 73 meters in length. Every yacht is built to the individual preferences of each client, reflecting the company's "made to measure" approach, which extends even to smaller models. Sanlorenzo produces a limited number of yachts per year - 69 in 2024 - carefully expanding its product offering by introducing new lines without diluting existing ones. This strategy supports exclusivity, high average revenue per yacht (EUR 11,6 million in 2024), and strong profitability. Production is concentrated across four shipyards in the Ligurian and Tuscan coasts, within Italy's nautical district, leveraging a network of highly skilled artisans and strategic suppliers. Sanlorenzo emphasizes customer intimacy and long-term relationships, with most sales going directly to end customers rather than through intermediaries. This direct-to-client model allows the company to secure contracts with clear payment schedules tied to production milestones, resulting in strong revenue visibility and predictable cash flows. As a result, Sanlorenzo collects significant portions of payments before delivery, reducing the need to tie up large amounts of capital in unsold inventory or receivables, and thereby minimizing working capital risk. The company's competitive moat is rooted in its brand strength, regarded globally as a symbol of excellence, exclusivity, and Italian craftsmanship. Its yachts are instantly recognizable for their timeless and innovative design. Sanlorenzo has cultivated a highly loyal base of ultra-high-net-worth individuals who value quality, customization, and the emotional significance of yacht ownership. Beyond product quality, Sanlorenzo enhances the customer experience through exclusive services such as yacht maintenance, restyling, refitting, charter programs, and crew training via the Sanlorenzo Academy. The company also stands at the forefront of sustainable innovation, with industry-first technologies like the green methanol reformer fuel cell on the 50Steel and hydrogen propulsion in Bluegame vessels. These advances position Sanlorenzo as a leader in the green transition of the yachting industry. By maintaining its high-end positioning across multiple market segments, combining aesthetic and technical excellence with a scarcity-driven business model, and reinforcing customer relationships through service and innovation, Sanlorenzo has built a defensible and enduring competitive advantage in the global luxury yachting industry.

Management

Massimo Perotti is the CEO and Chairman of Sanlorenzo, having acquired the majority of the company in 2005. Since taking over, he has led Sanlorenzo through a significant transformation, positioning it as one of the world’s most prestigious luxury yacht builders. He is the company's largest shareholder, owning more than 54% of the shares, which strongly aligns his interests with those of long-term investors. Prior to acquiring Sanlorenzo, Massimo Perotti built a distinguished career at Azimut Benetti, one of the world’s leading yacht manufacturers. He began his executive journey in 1987 at the age of 27 and rose rapidly through the ranks, joining the board of directors with delegated powers in the early 1990s. In 1996, he was appointed CEO of Azimut's main division, overseeing key operations during a period of rapid expansion and industry leadership. His deep expertise in luxury yacht manufacturing and strategic business development was instrumental in shaping the next phase of Sanlorenzo’s growth. Under his leadership, Sanlorenzo has become known for its bespoke, made-to-measure yachts, strong financial performance, and pioneering approach to sustainable innovation. The company has successfully expanded across multiple product segments, maintained a scarcity-driven business model, and established itself as the leading monobrand yacht builder for vessels over 24 meters. Massimo Perotti’s long-term vision and commitment to quality craftsmanship have helped cultivate a loyal base of ultra-high-net-worth clients worldwide. He holds a degree in Economics from the University of Turin, where he graduated with top honors (110/110). In recognition of his leadership and contribution to the Italian economy, he was named national winner of the 2019 Entrepreneur of the Year Award, a distinction that highlights his ability to generate value through innovation, strategic clarity, and consistent execution. As CEO and majority owner, Massimo Perotti continues to drive Sanlorenzo’s global expansion and brand prestige while reinforcing the company's position as a pioneer in the luxury yachting sector. His alignment with shareholders, hands-on leadership style, and long-term strategic vision make him a key strength behind the company’s sustained success.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Sanlorenzo was founded in 1958, but it did not go public until December 2019. Thus, we only have numbers from 2020 and onwards. Sanlorenzo has managed to deliver a ROIC above 10% in all five years since its IPO, which is impressive. Sanlorenzo's strong ROIC is the result of several key strengths in how it runs its business. First, it builds its yachts across four shipyards located close to each other in Italy’s nautical district. This setup makes it easier to coordinate production and keep costs under control, especially since the company works closely with skilled local artisans and trusted suppliers. Second, Sanlorenzo sells most of its yachts directly to customers rather than through middlemen. This gives the company a clear view of future revenue and helps it collect payments in stages, which reduces the need to tie up cash in unsold inventory. Finally, because each yacht is custom-made and highly exclusive, Sanlorenzo can charge premium prices, which supports strong profit margins. ROIC decreased slightly in 2024. This was mainly due to the company making large investments that haven’t yet had time to fully pay off. One of the biggest moves was the acquisition of Nautor Swan, a smaller business with lower profit margins and higher depreciation costs compared to Sanlorenzo’s core operations. This pulled down the group’s overall profitability. On top of that, Sanlorenzo invested €188.1 million during the year—much more than in previous years - including €138,8 million spent on acquiring Nautor Swan and Simpson Marine. These investments increased the amount of capital tied up in the business faster than profits grew, which temporarily reduced the return on invested capital. Hence, the small drop in 2024 isn't a concern for me.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. We only have data for the past five years because Sanlorenzo went public with its IPO in 2019. Nonetheless, the numbers are impressive: Sanlorenzo has increased its equity every single year since then. And not only has equity grown, but the increase has exceeded 20% annually, which is exceptional. This strong performance mainly stems from the company’s high and steady profits, much of which is reinvested to support growth. In addition, Sanlorenzo has made a series of strategic acquisitions - such as Nautor Swan and Simpson Marine - that have expanded its asset base and added long-term value. As a result, shareholder equity has grown meaningfully year after year, signaling a company that continues to build real value for its owners.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. As explained previously, we only have data for the past five years since Sanlorenzo went public in 2019. Sanlorenzo delivered positive free cash flow in the first four years after its IPO, but free cash flow turned negative in 2024. This was mainly because the company made large investments to grow the business. It spent around €83 million to acquire Nautor Swan and Simpson Marine. The Nautor Swan deal was paid partly in shares and partly in cash - about two-thirds in cash and one-third in shares. In addition, Sanlorenzo invested €49,3 million in expanding its production capacity and developing new yacht models. The company also used more cash to support its day-to-day operations. This was largely due to expanding its direct distribution network in Europe, the Americas, and especially the APAC region through Simpson Marine. To support this growth, Sanlorenzo needed to hold more inventory and cover extra costs up front, which tied up more cash temporarily. If we look at the business before these one-time items like acquisitions and buybacks, Sanlorenzo actually generated €112,8 million in cash during the year. That shows the underlying business remains strong and continues to produce solid cash flow, even if the headline number was negative. Despite all of this spending, Sanlorenzo still ended the year with a healthy net cash position of €29,1 million. It also returned €42,3 million to shareholders through dividends and share buybacks, including a €1 per share dividend - equal to 34% of its net profit. This suggests that investors can expect higher dividends and more repurchases in the future as Sanlorenzo grows its free cash flow. The company expects free cash flow to return to positive in 2025, especially as inventory levels and other upfront costs begin to normalize in the second half of the year. If it weren’t for these extraordinary items, Sanlorenzo would have achieved its highest free cash flow ever, with a levered free cash flow margin of 11,4% and a free cash flow yield of 9,8%. That indicates the shares are trading at an attractive valuation. However, we will revisit valuation later in the analysis.

Debt

Another important aspect to consider is debt. It’s crucial to assess whether a business has a manageable level of debt that could be repaid within three years. To do this, I divide the total long-term debt by the company’s earnings. After reviewing Sanlorenzo’s financial statements, I found that the company has just 0,52 years of earnings in debt. This is well below the three-year threshold, so debt is not a concern for me when investing in Sanlorenzo.

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Risks

Macroeconomic conditions are a key risk for Sanlorenzo. The company’s products are aimed at ultra-wealthy individuals, which makes demand more sensitive to changes in the global financial and economic environment. If the world economy, or the economies of regions where Sanlorenzo’s clients live, were to experience a downturn - such as a financial crisis or recession - it could reduce customers’ willingness to buy high-ticket items like yachts. Even wealthy buyers may delay or cancel purchases when confidence is low or financial markets are volatile. This risk is heightened by the fact that luxury purchases are discretionary. Even though Sanlorenzo’s customers can afford their products, they may hold off on large lifestyle investments during uncertain times—not out of necessity, but due to shifts in sentiment or priorities. Sanlorenzo’s customer base is also closely tied to global financial markets. When stocks, real estate, or other assets fall in value, it can reduce perceived wealth - even for the ultra-rich—and dampen demand for big-ticket items like yachts. A sharp market decline doesn’t need to wipe out fortunes to hurt sales; it just needs to shake confidence. The risk also applies to yachts that have already been ordered. In tough economic times, some customers might back out before finalizing the purchase. While Sanlorenzo typically retains advance payments under contract, it would still need to find a new buyer, which could take time or require price adjustments. Another part of Sanlorenzo’s business model involves occasionally accepting used yachts from customers as part of the payment for a new one. If the economic environment weakens, it could become harder to resell these used yachts quickly or at attractive prices. This would not only reduce revenue from new sales but also increase the number of unsold yachts sitting in inventory.

Geopolitical instability is a meaningful risk for Sanlorenzo, especially when it creates hesitation among buyers. Management has highlighted that several potential clients have expressed strong interest in purchasing a yacht but are choosing to delay final decisions due to ongoing political tensions. This includes uncertainty around the war in Ukraine, as well as developments in U.S. and European politics, which are contributing to a "wait-and-see" mindset. According to management, it’s not a question of willingness to buy - the demand is there. But some customers are holding off on signing contracts or making deposits until there is more clarity on global events. This was evident during the first major boat shows of the year in Düsseldorf, Miami, Istanbul, and Dubai, where Sanlorenzo had productive meetings but noted that some buyers were postponing action because of concerns over international politics and leadership changes. In particular, geopolitical signals from the United States, along with recent European elections, were cited as reasons why some high-net-worth clients preferred to delay their commitments. If this uncertainty persists, it could impact short-term order intake. However, management also noted that a resolution to the war in Ukraine could unlock pent-up demand quickly, with some Russian clients already reaching out and booking visits to the shipyards. In short, geopolitical risk doesn’t eliminate demand, but it can delay purchasing decisions. This introduces short-term unpredictability in new orders - not due to economic constraints, but because wealthy buyers are waiting for greater political clarity before committing to large purchases.

Sanlorenzo’s reliance on a select group of specialized suppliers and contractors presents a real risk to its operations. Because the company enforces extremely high production standards to deliver top-tier, custom-built yachts, only a limited number of suppliers are qualified to provide components that meet its quality and technical requirements. This makes Sanlorenzo more vulnerable to supply chain disruptions. If one of these key suppliers fails to deliver the necessary parts on time - whether due to production issues, financial difficulties, or external events like raw material shortages - Sanlorenzo often cannot simply switch to another supplier. The components involved are highly customized and must meet strict specifications, so replacements are not readily available off the shelf. In such cases, delays in receiving key components can push back production timelines and result in late deliveries to customers. This not only increases operational costs, but also creates the risk of contract cancellations, penalty payments, or damage claims. In some situations, Sanlorenzo could be required to replace defective components after delivery or even repurchase delivered yachts if quality issues arise. Beyond the financial impact, repeated delays or quality problems could also harm Sanlorenzo’s reputation. In the luxury yacht industry, where craftsmanship and reliability are closely tied to brand prestige, any failure to deliver on expectations can have long-term consequences for customer trust and future sales. In short, Sanlorenzo’s dependence on a small group of high-end suppliers is a structural risk: it’s a natural byproduct of the company’s commitment to quality, but it means that even small disruptions in the supply chain can have outsized effects on both financial performance and brand equity.

Reasons to invest

Favorable conditions for its products are a reason to invest in Sanlorenzo. The company’s target customers are ultra-high-net-worth individuals (UHNWIs)—a group that continues to grow both in size and spending power. According to the latest UBS projections, the number of UHNWIs is expected to increase by around 26.000 per year through 2026, which is higher than the historical average of 17.000 per year between 2013 and 2021. This represents a significant expansion of Sanlorenzo’s addressable market. In addition to the sheer growth in the number of wealthy individuals, there's another key trend: yacht ownership still has one of the lowest penetration rates among luxury assets in this demographic. That means there is still substantial untapped potential. As more UHNWIs are created each year - especially in North America, Asia-Pacific, and the Middle East - Sanlorenzo is well positioned to benefit from increasing interest in luxury yachts as a lifestyle asset. Importantly, the profile of the yacht buyer is also changing. New technologies, such as improved onboard connectivity, allow owners to work remotely and spend longer periods on their yachts. This shift is helping attract younger buyers. The average age of Sanlorenzo customers has already dropped from 56 (between 2016 and 2020) to 49, showing that the next generation of ultra-wealthy individuals is increasingly embracing the yachting lifestyle. Geographically, demand is also broadening. Sanlorenzo has seen rapid growth in the Middle East - for example, business in the region more than doubled in 2024, with strong momentum continuing into 2025, driven in particular by enthusiasm from Dubai. Taken together, the rising number of ultra-wealthy individuals, the low penetration of yachts in that segment, the appeal to younger buyers, and the geographic diversification of demand all support a long runway for growth.

The development of Sanlorenzo’s service business is an important reason to invest in the company. While the core of Sanlorenzo’s business remains the design and sale of luxury yachts, the company is increasingly focusing on expanding its high-margin, recurring service offerings—an area with strong long-term potential that is still underexploited today. Refitting and maintenance are particularly promising. As the global fleet of motor yachts grows and ages, demand for services like upgrades, repairs, and styling updates is expected to rise steadily. For example, the number of annual refittings for yachts over 40 meters more than doubled between 2003 and 2022, and that number is expected to keep growing. These services are also countercyclical - meaning they tend to hold up well even when new yacht sales slow - making them a valuable stabilizer for revenue and profitability. Sanlorenzo’s “Timeless” program, which bundles maintenance, refitting, and restyling, taps into this opportunity and helps keep owners within the Sanlorenzo ecosystem. The company is even exploring multi-year service contracts that extend warranty coverage, making ownership more convenient and increasing customer loyalty. Another area of growth is chartering. Through the Sanlorenzo Charter Fleet - the first monobrand charter fleet in the industry - owners can generate income by renting out their yachts when not in use. This offering strengthens Sanlorenzo’s customer experience, provides an attractive benefit to owners, and exposes potential new clients to the brand. Because chartering is asset-light, it enhances margins without requiring large upfront investment. As these services scale, they can evolve into a recurring revenue stream that complements Sanlorenzo’s yacht sales and adds resilience to the business model.

Sanlorenzo’s focus on expanding its direct distribution network is a strategic move that strengthens both its financial performance and customer relationships—making it an attractive reason to invest. Sanlorenzo sells most of its yachts directly to customers instead of going through dealers or middlemen. This gives the company full visibility into who is buying, when they’re buying, and what they’ve ordered. Because customers pay in stages while their yacht is being built, Sanlorenzo receives steady cash inflows and doesn’t need to produce and store unsold inventory. This helps the company manage its cash more efficiently and plan production based on actual demand. In 2024, Sanlorenzo took this strategy further by acquiring Simpson Marine, a leading dealer in Southeast Asia. This gives the company a direct presence in the fast-growing APAC region, allowing it to serve clients more closely and keep the portion of the sale that would normally go to an external distributor. Direct distribution also improves the customer experience. Sanlorenzo handles everything from first contact to delivery and beyond, allowing for a more personal and tailored relationship with clients. This helps the company better match its yachts with the right buyers and builds stronger loyalty. It also creates opportunities to offer additional services - like chartering, yacht management, maintenance, and brokerage - turning one-time buyers into long-term clients within the Sanlorenzo ecosystem. By handling more of the sales and service process internally, Sanlorenzo not only earns more from each sale but also ensures a more consistent brand experience. In a business that values exclusivity and craftsmanship, this level of control is a real competitive advantage.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 2,91, which is from 2024. I have selected a projected future EPS growth rate of 8%. Finbox expects EPS to grow by 7,4% in the next five years, but management anticipates growth in high single digits. Additionally, I have selected a projected future P/E ratio of 16, which is twice the growth rate. This decision is based on Sanlorenzo's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be €24,85. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Sanlorenzo at a price of €12,42 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow (excluding M&A and buybacks) last year was 162, and capital expenditures were 35. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 25 in our calculations. The tax provision was 38. We have 35,244 outstanding shares. Hence, the calculation will be as follows: (162 – 25 + 38) / 35,244 x 10 = €49,65 in Ten Cap price.

The final calculation is called the Payback Time price. It is a calculation based on the free cash flow per share. With Sanlorenzo's Free Cash Flow Per Share (excluding M&A and buybacks) at €3,20 and a growth rate of 8%, if you want to recoup your investment in 8 years, the Payback Time price is €36,76.

Conclusion

I find Sanlorenzo to be an intriguing company with great management. The company has built a moat through its brand, which is regarded globally as a symbol of excellence, exclusivity, and Italian craftsmanship. It has consistently achieved a high ROIC every year since its IPO, and that trend is expected to continue thanks to its strong business model. Sanlorenzo delivered negative free cash flow in 2024, but this was due to large investments to grow the business. The company expects to return to positive free cash flow in 2025. Macroeconomic conditions are a risk for Sanlorenzo because its ultra-wealthy customers may delay or cancel yacht purchases during periods of financial uncertainty, even if they can afford them. Economic downturns can weaken buyer confidence and reduce demand, while also making it harder to resell used yachts taken in as part of new orders. Geopolitical instability is also a risk because it causes wealthy buyers to hold off on purchases until there is more clarity around global events, such as wars or political shifts. While demand remains strong, this uncertainty can temporarily reduce new orders and make short-term sales less predictable. Sanlorenzo’s dependence on a small number of specialized suppliers is another risk. Any disruption - whether from delays, shortages, or quality issues - can lead to production setbacks, increased costs, or customer dissatisfaction. Since many components are highly customized, replacing a supplier isn’t easy, which makes the company vulnerable to even minor supply chain problems. Favorable market trends make Sanlorenzo an attractive investment. The number of ultra-high-net-worth individuals is growing quickly, and yacht ownership among this group remains low - leaving significant untapped potential. The development of Sanlorenzo’s service business is another reason to invest. It adds stable, high-margin revenue through offerings like maintenance, refitting, and chartering - areas that grow as the global yacht fleet ages and tend to hold up well even when new sales slow. Sanlorenzo’s expansion of its direct distribution network also supports long-term growth. It gives the company more control over sales, improves cash flow, and strengthens customer relationships. By working directly with clients, Sanlorenzo can better match products to buyers, keep more of the value from each sale, and offer tailored services that build loyalty and recurring revenue. I believe Sanlorenzo is a great company, and I think buying shares at the Payback Time price of €36 will be a good long-term investment. If you think I’m being too optimistic, you may want to wait for an entry point below €28, as the company has significantly ramped up buybacks at that price level.

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