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GuruFocus has detected 5 Warning Signs with The Estee Lauder Companies Inc $EL.
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The Estee Lauder Companies Inc (NYSE:EL)
Altman Z-Score
5.55 (As of Today)

The Estee Lauder Companies Inc has a Z-score of 5.55, indicating it is in Safe Zones. This implies the Z-Score is strong.

The zones of discrimination were as such:

When Z-Score is less than 1.81, it is in Distress” Zones.
When Z-Score is greater than 2.99, it is in Safe Zones.
When Z-Score is between 1.81 and 2.99, it is in Grey” Zones.

EL' s Altman Z-Score Range Over the Past 10 Years
Min: 2.32   Max: 8.18
Current: 5.55

2.32
8.18

During the past 13 years, The Estee Lauder Companies Inc's highest Altman Z-Score was 8.18. The lowest was 2.32. And the median was 5.63.


Definition

Z-Score model is an accurate forecaster of failure up to two years prior to distress. It can be considered the assessment of the distress of industrial corporations.

The Estee Lauder Companies Inc's Altman Z-Score for today is calculated with this formula:

Z=1.2*X1+1.4*X2+3.3*X3+0.6*X4+1.0*X5
=1.2*0.1845+1.4*0.7296+3.3*0.1424+0.6*4.7046+1.0*1.0115
=5.55

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Trailing Twelve Months (TTM) ended in Mar. 2017:
Total Assets was $11,445 Mil.
Total Current Assets was $4,972 Mil.
Total Current Liabilities was $2,860 Mil.
Retained Earnings was $8,350 Mil.
Pretax Income was 407 + 600 + 403 + 130.2 = $1,540 Mil.
Interest Expense was -28 + -22 + -21 + -18.7 = $-90 Mil.
Revenue was 2857 + 3208 + 2865 + 2646.3 = $11,576 Mil.
Market Capitalization (Today) was $34,466 Mil.
Total Liabilities was $7,326 Mil.

X1=Working Capital/Total Assets
=(Total Current Assets - Total Current Liabilities)/Total Assets
=(4972 - 2860)/11445
=0.1845

X2=Retained Earnings/Total Assets
=8350/11445
=0.7296

X3=Earnings Before Interest and Taxes/Total Assets
=(Pretax Income + Interest Expense)/Total Assets
=(1540.2 + -89.7)/11445
=0.1424

X4=Market Value Equity/Book Value of Total Liabilities
=Market Capitalization/Total Liabilities
=34465.890/7326
=4.7046

X5=Revenue/Total Assets
=11576.3/11445
=1.0115

The zones of discrimination were as such:

Distress” Zones - 1.81 < “Grey” Zones < 2.99 - “Safe” Zones

The Estee Lauder Companies Inc has a Z-score of 5.55 indicating it is in Safe Zones.

Study by Altman found that companies that are in Distress Zone have more than 80% of chances of bankruptcy in two years.


Explanation

X1: The Working Capital/Total Assets (WC/TA) ratio is a measure of the net liquid assets of the firm relative to the total capitalization. Working capital is defined as the difference between current assets and current liabilities. Ordinarily, a firm experiencing consistent operating losses will have shrinking current assets in relation to total assets. Altman found this one proved to be the most valuable liquidity ratio comparing with the current ratio and the quick ratio. This is however the least significant of the five factors.

X2: Retained Earnings/Total Assets: the RE/TA ratio measures the leverage of a firm. Retained earnings is the account which reports the total amount of reinvested earnings and/or losses of a firm over its entire life. Those firms with high RE, relative to TA, have financed their assets through retention of profits and have not utilized as much debt.

X3, Earnings Before Interest and Taxes/Total Assets (EBIT/TA): This ratio is a measure of the true productivity of the firm’s assets, independent of any tax or leverage factors. Since a firm's ultimate existence is based on the earning power of its assets, this ratio appears to be particularly appropriate for studies dealing with corporate failure. This ratio continually outperforms other profitability measures, including cash flow.

X4, Market Value of Equity/Book Value of Total Liabilities (MVE/TL): The measure shows how much the firm’s assets can decline in value (measured by market value of equity plus debt) before the liabilities exceed the assets and the firm becomes insolvent.

X5, Revenue/Total Assets (S/TA): The capital-turnover ratio is a standard financial ratio illustrating the sales generating ability of the firm’s assets.

Read more about Altman Z-score and the original research.


Be Aware

Z score does not apply to financial companies.


Related Terms

Total Assets, Total Current Assets, Total Current Liabilities, Retained Earnings, Pretax Income, Interest Expense, Revenue, Market Capitalization, Total Liabilities, Financial Strength


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

The Estee Lauder Companies Inc Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
X1 0.1790.21710.28070.29030.27780.26230.33070.35180.24960.1675
X2 0.66210.61560.61720.6680.65610.72270.75070.79630.85140.8341
X3 0.18180.16180.08080.1480.17360.20050.2180.23340.1970.1763
X4 3.0722.68221.45692.61964.5985.45296.61387.08367.08755.923
X5 1.70581.57861.41481.46111.40421.47331.4251.3941.31041.2211
Z-score 5.294.843.764.805.996.737.567.957.706.73
Zones Safe ZonesSafe ZonesSafe ZonesSafe ZonesSafe ZonesSafe ZonesSafe ZonesSafe ZonesSafe ZonesSafe Zones

The Estee Lauder Companies Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
X1 0.30320.28810.24960.2290.23260.20630.16750.18070.02950.1845
X2 0.86060.85760.85140.85740.88070.87470.83410.84250.72940.7296
X3 0.21810.21860.1970.2050.20080.19410.17630.17050.14120.1424
X4 7.14797.42127.08756.05996.53416.9575.9235.70053.77494.2558
X5 1.39381.35651.31041.30371.28921.26361.22111.2081.01471.0115
Z-score 7.978.087.707.097.387.556.736.594.805.28
Zones Safe ZonesSafe ZonesSafe ZonesSafe ZonesSafe ZonesSafe ZonesSafe ZonesSafe ZonesSafe ZonesSafe Zones
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