Does Estée Lauder’s 13% Rally Signal a Longer-Term Recovery Opportunity?

Wondering what to make of Estée Lauder Companies stock after its recent swings? If you’re like many investors, you might be scratching your head as fresh news and market sentiment send signals in every direction. After all, it's not every day you see a stock bounce back with a 13.0% gain over the past 30 days and still be down more than 50% over the last five years. That kind of rollercoaster ride prompts big questions: is this the start of a turnaround, or just a blip?

Lately, headlines have spotlighted Estée Lauder’s efforts to streamline operations and explore new luxury partnerships, giving investors reasons to reconsider the company’s long-term potential. Such moves suggest management is adjusting to changing consumer trends, and Wall Street appears to be taking notice, with the share price recovering 3.5% just in the last week. Still, the shadow of a multi-year slump (down 52.0% over five years) lingers, reminding us that hope and risk go hand in hand.

So, how does Estée Lauder stack up if you’re focused on value? According to our six-point undervaluation check, the stock earns a score of 2, signaling there’s potential upside, but not a clear bargain just yet. Up next, we’ll dive into each of these valuation benchmarks and see exactly where Estée Lauder shines, where it falls short, and hint at a smarter way to measure long-term value that most investors miss.

Estée Lauder Companies scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Estée Lauder Companies Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's value by projecting its future free cash flows and then discounting those estimated cash flows back to today's dollars. This approach highlights both the company's earning power and the risk investors assign to those future earnings.

For Estée Lauder Companies, the most recent free cash flow stands at $483.3 Million. Analysts forecast steady growth in these cash flows, with projections reaching over $3.0 Billion by 2035. The first several years are built from analyst consensus. By 2029, free cash flow is expected to rise to about $2.0 Billion. These longer-term estimates are extrapolated, meaning actual results could vary, but the trend is clearly upward.

Based on this model, the intrinsic value of Estée Lauder Companies shares is calculated at $115.77. That is roughly 14.8% higher than the current share price, according to the latest data, implying the stock is undervalued by the market.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Estée Lauder Companies.

Our Discounted Cash Flow (DCF) analysis suggests Estée Lauder Companies is undervalued by 14.8%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Estée Lauder Companies Price vs Sales

For profitable companies that generate steady revenue, the price-to-sales (P/S) ratio is a widely accepted valuation tool. This multiple is especially helpful when profit margins temporarily fluctuate, as is often the case with cyclical or recovering businesses, since it focuses on top-line performance and market confidence in future growth.

When determining what a “normal” or “fair” P/S ratio should be, it is important to consider not just historical averages but also the company’s growth outlook and perceived risks. Higher growth prospects or lower risk often justify a P/S above the industry mean, while greater risk might drag it down.

Estée Lauder Companies currently trades at a P/S ratio of 2.48x. For context, its industry (Personal Products) averages 1.11x, and comparable peers come in at 2.94x. That puts Estée Lauder below its peer average but well above the industry norm, reflecting both its premium position and current market skepticism.

Simply Wall St’s "Fair Ratio" digs deeper than basic benchmarks, accounting for growth rates, risk factors, profit margins, size, and competitive position to offer a tailored multiple. For Estée Lauder, the Fair Ratio is calculated at 2.25x, a figure that arguably captures the company’s unique balance of brand strength and current challenges better than a generic industry or peer comparison.

With Estée Lauder’s actual P/S ratio at 2.48x and the Fair Ratio at 2.25x, the stock looks only slightly above fair value. This is a difference small enough to suggest the shares are neither meaningfully overvalued nor undervalued by this measure.

Result: ABOUT RIGHT

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Estée Lauder Companies Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply a story you create about a company that captures your specific expectations for its future revenue, margins, and fair value. It connects what you believe will happen to the business with the numbers that reflect that belief.

On Simply Wall St’s platform, Narratives allow investors to link their own insights or views (the "story") with customizable forecasts, so you can see a fair value that matches your assumptions rather than just the consensus. This makes investing both more transparent and personal, empowering you to compare a Narrative’s fair value to the current share price and decide whether to buy or sell based on your outlook. Narratives are easy to set up and live within the Community page, used by millions of investors. They update automatically as news breaks or earnings are released, ensuring your perspective stays relevant and dynamic.

For Estée Lauder Companies, one investor might believe digital and emerging market growth will fuel global expansion, driving revenue to $16 billion by 2028 and justifying a fair value over $120. Another may focus on restructuring costs and market headwinds, seeing fair value closer to $61. Your Narrative keeps you focused on your conviction, not just consensus.

Do you think there's more to the story for Estée Lauder Companies? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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