Italian stocks: beyond Ferrari, two real gems
2026-10-21 · By Lubin Danilo, founder of Lubin Investment
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In Italy three companies stand out: Recordati and Ferrari (9 out of 10 each) and Prysmian (8 out of 10). Ferrari is the most expensive at 45 times its free cash flow. Recordati and Prysmian trade at reasonable valuations. Banks look cheap but score poorly on my quality grid.
Say "Italian stock" to a French investor and the answer is Ferrari. After a pause, maybe UniCredit or Enel. That is about it. Milan is a market most people know through three or four logos.
Yet on July 30, 2026, two Italian companies published results on the same day that moved their valuation. Ferrari reported €1.94bn of quarterly sales (+8%) and raised its annual outlook to about €7.6bn. Prysmian, a cable maker almost nobody talks about, posted the best quarter in its history and raised its targets too.
So I did what I do for every country: I ran ten Milan listed companies through my grid. It judges the quality of a business (margins, growth, cash generated, debt, share count) separately from the price, then looks at how much the stock is valued against the free cash flow it produces, meaning the money left once the necessary investments are paid. The result is not what I expected.
Recordati: the gem nobody looks for
Recordati is a pharmaceutical company based in Milan, specialized in rare diseases, conditions that affect few patients and rarely have more than one treatment. In that business a protected drug can sell at a high price for a long time, which explains margins you rarely see in classic industry.
The numbers follow. Sales went from €1.85bn in 2022 to €2.62bn in 2025, about 12% a year. 19.5% of those sales end up as free cash, and the company converts 115% of its profit into real cash, a sign that profit is solid and not an accounting artifact. The share count has not moved (about 209 million), so nothing is diluted.
On July 28, first half results confirmed the path: €1.41bn of sales (+6.6%), an EBITDA margin of 38.3% and €299m of free cash over the period. The engine is Isturisa, a rare disease treatment, while the metabolic range fell 8%. Two caveats I do not hide: net debt of €1.9bn is about four years of free cash, and free cash is irregular (€365m in 2022, €102m in 2023, negative €281m in 2024, then €512m in 2025). I do not know the exact cause of 2024, and that kind of volatility keeps me from calling it a steady machine.
On price, the stock is valued at 21.7 times its free cash flow. My cautious model puts it just under its buying threshold, with a safety margin of only about 3%. Fair, not cheap.
Prysmian: a good business whose shareholders pay for the growth
Prysmian makes electric cables: submarine ones to connect offshore wind farms, high voltage ones for grids, and more and more to power data centers. It is an oligopoly, because laying a submarine cable takes specialized vessels and know-how that few companies have.
Its free cash went from €584m in 2022 to €1.37bn in 2025, on sales rising from €16.1bn to €19.7bn. On July 30 the group announced adjusted EBITDA of €730m for the second quarter (+20.7%) and raised its annual free cash target from €1.3 to 1.4bn to €1.65 to 1.75bn. That is a massive upgrade.
But there is a flip side the result does not show. The share count rose about 11% between 2022 and 2025, from 266 to 295 million, close to 3.6% a year: it is the only criterion that fails in my grid. I read it as the price of acquisitions (General Cable, Encore Wire) partly paid with new shares, but that is my reading, not a verified figure. Concretely, each share owns a smaller slice of the pie. The stock is valued at 23 times its free cash flow, with about 6.5% of room under my buying threshold.
Ferrari: excellent, and already paid for
I will not retell the brand story here, I did it in my analysis of Ferrari's moat. The numbers confirm it: free cash went from about €1.06bn in 2022 to €1.86bn in 2025, and the share count fell from 182 to 178 million. In the second quarter of 2026 the operating margin reached 31.2% even as deliveries fell (3,366 cars versus 3,494): Ferrari sells fewer cars, but at higher prices, thanks to personalization.
The problem is the price. The stock is valued at 45 times its free cash flow, and my model puts it about 18% above its buying threshold. I have no usable valuation history for Milan listed stocks, so I cannot place it against its own past, but the conclusion holds: today you pay up front for several years of success.
Banks and insurers: not cheap for all that
On July 23, UniCredit published a first half net profit of €6.3bn, raised its 2026 target to about €11.5bn and confirmed it distributes 80% of profits, 30% of it through buybacks. The share count falls almost 9% a year. On paper that is appealing, and the stock is valued at only 16 times its free cash flow.
But these numbers must be read with how a bank works in mind. For a bank, customer deposits are debt: they sit on the balance sheet as money it owes back. Hence a debt level that looks huge (10.6 years of free cash) and a return on capital of only 3.7%, two measures that do not mean the same thing as for an industrial company. My grid is not built to judge banks on these points, which is why it scores UniCredit 5 out of 10, like Intesa Sanpaolo. To be honest, these scores warn about the limits of my method, not about these banks.
Generali is the opposite case. It scores 8 out of 10 and is valued at 3.6 times its free cash flow, which looks like a bargain. It is a reading trap: an insurer collects premiums before paying claims, and that float (the customers' money it holds temporarily) inflates its free cash artificially. The same figure on an industrial company would be suspect. I read it as a hint, not a promise.
What the table says
| Company | Quality score | Sales turned into free cash | Valuation (times free cash) | My reading |
|---|---|---|---|---|
| Recordati (REC) | 9 out of 10 | 19.5% | 21.7 | Real quality, fair price |
| Prysmian (PRY) | 8 out of 10 | 7.0% | 23.2 | Good business, diluted shares |
| Ferrari (RACE) | 9 out of 10 | 19.7% | 45.2 | Excellent, already paid for |
| Generali (G) | 8 out of 10 | 25.9% | 3.6 | Handle with care |
| Leonardo (LDO) | 6 out of 10 | 3.8% | 39.6 | Strong story, weak cash |
| UniCredit (UCG) | 5 out of 10 | 29.0% | 16.3 | Bank: grid ill suited |
Leonardo, the defense group, deserves a mention: its 6 out of 10 is carried by solid European defense demand, but only 3.8% of its sales become free cash and the stock is valued at close to 40 times that cash. A good story, not yet a good price. Eni scores 3 out of 10: its free cash per share falls about 21% a year.
My conclusion fits in one sentence: in Italy, quality is not where fame is. Recordati and Prysmian are the two files I would look at first, Ferrari is one to watch while waiting for a better price, and banks need a different grid than mine. To dig further, the Recordati page, the Prysmian page and the Ferrari page detail each criterion.
Sources to check: Recordati's first half 2026 release, Prysmian's July 30, 2026 release and Ferrari's second quarter 2026 6-K. To compare countries you can also reread my study of German stocks or browse the screener.
FAQ
What are the best quality Italian stocks?
In my sample of ten Milan listed companies, Recordati (9 out of 10), Ferrari (9 out of 10) and Prysmian (8 out of 10) get the best quality scores. Ferrari is the most expensive of the three, valued at 45 times its free cash flow.
Are Italian banks undervalued?
They look cheap, but my grid judges banks poorly because their deposits count as debt. UniCredit and Intesa score 5 out of 10, which mostly signals the limit of the method.
Why does Prysmian lose a point despite strong results?
Because its share count rose about 11% between 2022 and 2025, which dilutes every shareholder despite sharply higher free cash.
Related reading
- Dutch stocks: ASML isn't alone at the top
- Danish stocks: Novo Nordisk isn't the best of them
- Swedish stocks: rare quality, almost never on sale
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About the author
Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).