Analyzing the Market Sentiment of Estée Lauder (EL) Stocks

Tumbling to a price of $110.79 during today's evening trading session, shares of Estée Lauder are now -26.18% below their average target price of $150.08. Does this mean the stock will reverse course? Analysts are giving EL an average rating of buy and target prices ranging from 122.0 to 195.0 dollars per share.

The market seems to share this optimistic view, since Estée Lauder has a short interest of only 1.8% (this is the percentage of the share float that is being shorted). Each short position represents an investor's expectation that the price of the stock will decrease in the future.

When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.

Another way to gauge the sentiment on Estée Lauder is to look at the percentage of institutions that are invested in the stock. In this case, 91.9% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.

If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.

To sum up, Estée Lauder is probably the subject of positive market sentiment because of an analyst consensus of strong upside potential, a buy rating, a very low short interest, and a significant number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.

Here's a snapshot of some important facts to keep in mind about EL:

  • The stock has trailing 12 month earnings per share (EPS) of $1.78

  • Estée Lauder has a trailing 12 month Price to Earnings (P/E) ratio of 62.2 compared to the S&P 500 average of 27.65

  • The company has a Price to Book (P/B) ratio of 6.92 in contrast to the S&P 500's average ratio of 4.59

  • Estée Lauder is a Consumer Discretionary company, and the sector average P/E and P/B ratios are 22.06 and 3.18 respectively

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.