The Estee Lauder Companies Inc (EL, Financial) has recently shown a daily gain of 1.26%, complemented by a 3-month gain of 4.49%. With an Earnings Per Share (EPS) of $1.52, investors are prompted to consider whether the stock is significantly undervalued. The following analysis delves into The Estee Lauder's valuation, offering insights into its financial stability and growth prospects, with the aim of answering this pivotal question.
Company Introduction
The Estee Lauder Companies Inc (EL, Financial) is a renowned leader in the global prestige beauty market with a diverse portfolio of brands. The company boasts a substantial presence across skin care, makeup, fragrance, and hair care categories. Operating in over 150 countries, The Estee Lauder generates a balanced revenue stream from the Americas, Europe, the Middle East, Africa, and the Asia Pacific. With a current stock price of $147.55 and a Fair Value (GF Value) of $243.53, the stock appears to be significantly undervalued. This discrepancy sets the stage for a deeper evaluation of the company's intrinsic value.
Summarize GF Value
The GF Value is a measure of a stock's intrinsic value, incorporating historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The Estee Lauder (EL, Financial) is currently deemed significantly undervalued according to the GF Value. This suggests that the stock's market price is well below its estimated fair value, potentially indicating higher future returns for investors. The GF Value Line serves as a benchmark, suggesting that the stock price will likely gravitate towards it over time.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
Investors must assess a company's financial strength to avoid potential capital loss. The Estee Lauder's cash-to-debt ratio of 0.31 ranks in the lower half of its industry, prompting GuruFocus to assign a financial strength rating of 6 out of 10. This rating indicates a fair balance sheet but warrants careful consideration by investors.
Profitability and Growth
Profitability is a key factor in investment safety. The Estee Lauder has maintained profitability over the last decade, with a solid operating margin that surpasses more than half of its industry peers. The company's profitability score stands at a robust 9 out of 10. However, in terms of growth, The Estee Lauder's revenue and EBITDA growth rates are middling within the Consumer Packaged Goods industry.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) is another method to evaluate profitability. The Estee Lauder's ROIC of 5.63 is currently below its WACC of 8.91, indicating the company may not be creating value for shareholders at the expected rate.
Conclusion
In conclusion, The Estee Lauder Companies Inc (EL, Financial) is considered significantly undervalued based on GuruFocus' metrics. With fair financial health and strong profitability, the company's growth rates are competitive within the industry. For a more detailed financial overview, investors are encouraged to review The Estee Lauder's 30-Year Financials here.
To discover high-quality companies that may offer above-average returns, please visit the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
