Estée Lauder Companies (NYSE:EL) investors are sitting on a loss of 37% if they invested a year ago

The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the The Estée Lauder Companies Inc. (NYSE:EL) share price slid 38% over twelve months. That falls noticeably short of the market return of around 11%. To make matters worse, the returns over three years have also been really disappointing (the share price is 35% lower than three years ago). Shareholders have had an even rougher run lately, with the share price down 28% in the last 90 days.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Estée Lauder Companies

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Unhappily, Estée Lauder Companies had to report a 58% decline in EPS over the last year. This fall in the EPS is significantly worse than the 38% the share price fall. It may have been that the weak EPS was not as bad as some had feared. With a P/E ratio of 50.18, it's fair to say the market sees an EPS rebound on the cards.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Estée Lauder Companies' key metrics by checking this interactive graph of Estée Lauder Companies's earnings, revenue and cash flow.

A Different Perspective

Investors in Estée Lauder Companies had a tough year, with a total loss of 37% (including dividends), against a market gain of about 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 1.0% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Estée Lauder Companies better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Estée Lauder Companies (of which 2 are significant!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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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.