As of September 15, 2023, The Estee Lauder Companies Inc (EL, Financial) stock's daily gain stands at 2.3%, with a 3-month loss of 19.4%. The company's Earnings Per Share (EPS) (EPS) is 2.78. But the question remains: is the stock significantly undervalued? This article aims to provide an in-depth analysis of The Estee Lauder's valuation, encouraging you to delve into the comprehensive assessment that follows.
Company Introduction
The Estee Lauder Companies Inc (EL, Financial) is a global leader in the prestige beauty market, with a diverse portfolio of brands and a presence in over 150 countries. The company's stock is currently priced at $157.78, while the GF Value, an estimation of its fair value, is $253.59. This article will explore whether The Estee Lauder's stock is indeed significantly undervalued by integrating financial assessment with essential company details.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value developed by GuruFocus. It is derived from historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
The Estee Lauder (EL, Financial) stock appears to be significantly undervalued based on GuruFocus' valuation method. Given its current price of $157.78 per share, The Estee Lauder stock appears to be significantly undervalued. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. The Estee Lauder has a cash-to-debt ratio of 0.4, which is worse than 52.98% of 1797 companies in the Consumer Packaged Goods industry. GuruFocus ranks the overall financial strength of The Estee Lauder at 6 out of 10, which indicates that the financial strength of The Estee Lauder is fair.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, is generally less risky. The Estee Lauder has been profitable 10 over the past 10 years, with an operating margin of 11.13% over the past twelve months. This ranks better than 76.72% of 1817 companies in the Consumer Packaged Goods industry. GuruFocus ranks the profitability of The Estee Lauder at 9 out of 10, indicating strong profitability.
One of the most important factors in the valuation of a company is growth. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of The Estee Lauder is 4.2%, which ranks worse than 57.82% of 1719 companies in the Consumer Packaged Goods industry. The 3-year average EBITDA growth is 10.2%, which ranks better than 57.28% of 1524 companies in the Consumer Packaged Goods industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). The Estee Lauder's ROIC was 9.07 over the past 12 months, while its WACC came in at 9.36. This suggests that the company is creating value for shareholders.
Conclusion
In conclusion, The Estee Lauder (EL, Financial) stock appears to be significantly undervalued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 57.28% of 1524 companies in the Consumer Packaged Goods industry. To learn more about The Estee Lauder stock, you can check out its 30-Year Financials here.
To find out the high quality companies that may deliver above average returns, please check out GuruFocus High Quality Low Capex Screener.
