Required knowledge for Estee Lauder (EL) Investors

By Kim Brooks • Wednesday, December 20 10:55 • Permanent Link

We've been asking ourselves recently if the market has placed a fair valuation on Estee Lauder. Let's dive into some of the fundamental values of this large-cap Consumer Discretionary company to determine if there might be an opportunity here for value-minded investors.

Estee Lauder Has Elevated P/B and P/E Ratios:

The Estée Lauder Companies Inc. manufactures, markets, and sells skin care, makeup, fragrance, and hair care products worldwide. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.96 and an average price to book (P/B) ratio of 4.24. In contrast, Estee Lauder has a trailing 12 month P/E ratio of 96.6 and a P/B ratio of 9.9.

Estee Lauder's PEG ratio is 3.33, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

Increasing Revenues but Narrowing Margins:

	2018	2019	2020	2021	2022	2023
Revenue (MM)	$13,683	$14,863	$14,294	$16,215	$17,737	$15,910
Revenue Growth	n/a	8.62%	-3.83%	13.44%	9.39%	-10.3%
Operating Margins	15%	16%	7%	21%	18%	9%
Net Margins	8%	12%	5%	18%	14%	6%
Net Income (MM)	$1,117	$1,794	$696	$2,875	$2,408	$1,010
Net Interest Expense (MM)	$128	$133	$161	$173	$167	$255
Depreciation & Amort. (MM)	$531	$557	$611	$651	$727	$744
Earnings Per Share	$2.95	$4.82	$1.86	$7.79	$6.55	$2.7900000000000005
EPS Growth	n/a	63.39%	-61.41%	318.82%	-15.92%	-57.4%
Diluted Shares (MM)	376	370	367	368	365	361
Free Cash Flow (MM)	$1,933	$1,773	$1,657	$2,994	$2,000	$728
Capital Expenditures (MM)	$629	$744	$623	$637	$1,040	$1,003
Current Ratio	1.71	1.69	1.9	1.73	1.66	1.45
Total Debt (MM)	$3,391	$5,178	$4,921	$5,277	$5,124	$7,097
Net Debt / EBITDA	0.47	0.55	-0.38	0.17	0.36	1.78

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.