Is Estée Lauder a Bargain After 24% Rebound and Beauty Tech Strategy Shift?

• Wondering if Estée Lauder Companies is fairly priced or hiding a bargain? You are not alone, and now is the perfect time to dig into what the numbers say about its value.
• The stock has seen a 24.3% jump year-to-date, up 4.4% just this week even after dropping 10.0% across the last month. It is still recovering from deeper losses over the past few years.
• Much of this renewed momentum comes from industry discussions about demand trends and the company's push into new markets, especially after headlines about shifting consumer preferences in the cosmetics space shook investor confidence this spring. Additionally, leadership changes and strategic investments into emerging beauty tech have sparked fresh optimism.
• On our valuation checks, Estée Lauder Companies scores just 1 out of 6, but raw numbers never tell the whole story. Let's walk through how we approach valuation, and stay tuned for a better way to get the full picture by the end of this article.

Estée Lauder Companies scores just 1/6 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

A Discounted Cash Flow (DCF) model estimates a company's intrinsic value by projecting its future cash flows and then discounting them back to today using an appropriate rate. This helps investors determine what the company is really worth based on its ability to generate cash in the future.

For Estée Lauder Companies, the current Free Cash Flow (FCF) stands at $816.6 Million. Analyst forecasts predict steady growth with FCF expected to reach about $1.41 Billion within five years and climbing further to $1.99 Billion by 2030. These long-term projections, while starting with analyst estimates, are supplemented by Simply Wall St’s own assumptions for later years.

Based on the DCF calculation using a 2 Stage Free Cash Flow to Equity model, Estée Lauder’s intrinsic value is estimated at $104.64 per share. Compared to the current share price, this suggests the stock is trading at a 12.1% discount. This may indicate it is undervalued today.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Estée Lauder Companies is undervalued by 12.1%. Track this in your watchlist or portfolio, or discover 932 more undervalued stocks based on cash flows.

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

Approach 2: Estée Lauder Companies Price vs Sales

For established companies like Estée Lauder, the Price-to-Sales (PS) ratio is a useful valuation measure, especially when profits fluctuate or are temporarily negative. The PS ratio compares a company’s share price to its revenues, providing a lens into how much investors are paying for each dollar of sales. This is a valuable approach in consumer sectors where margins and growth are key.

A company’s growth expectations, profit margins, and risk profile all influence what makes a PS ratio “fair.” Higher sales growth and stronger margins tend to justify higher PS ratios, as do lower risk profiles or leadership positions within an industry.

Estée Lauder Companies currently trades at a PS ratio of 2.29x. This is significantly higher than the industry average of 1.04x, and also ahead of its peer group average of 1.50x. However, it is important to look beyond basic comparisons. Simply Wall St’s Fair Ratio for Estée Lauder is 2.15x, reflecting factors like its anticipated earnings growth, healthy margins, sector dynamics, and overall market value.

The Fair Ratio is a more customized benchmark than peer or industry averages. It adjusts for company-specific strengths, risks, and prospects, providing a more meaningful sense of what the stock should be worth in its current context.

Comparing the current PS ratio (2.29x) with the Fair Ratio (2.15x), the difference of just 0.14x suggests the stock's valuation is a little on the high side, but not dramatically out of line with its fundamentals.

Result: ABOUT RIGHT

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1437 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Estée Lauder Companies Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives, a smarter, more dynamic approach that lets you build your investment decision around both the story and the numbers behind Estée Lauder Companies.

With Narratives, you make sense of a company by combining your personal perspective or thesis (for example, “Estée Lauder’s digital expansion will drive sustained growth”) with your expected financial outcomes, including fair value, revenue, earnings, and margins, and see how they stack up against the current share price.

Narratives link the company’s story to a financial forecast and a fair value estimate, making investing easier to understand and more actionable.

This tool is available on Simply Wall St’s Community page, used by millions of investors, letting you easily track, refine, and compare your views alongside others in real time.

When news or earnings updates break, Narratives are automatically refreshed so your analysis always reflects the latest information.

For example, on Estée Lauder Companies, one investor’s Narrative might see the stock as fairly valued at $120 based on bullish assumptions about digital partnerships and luxury demand, while another might set their fair value at $61, focusing on risks from competition and global weakness. The difference in story leads to different estimates and investing decisions.

Do you think there's more to the story for Estée Lauder Companies? Head over to our Community to see what others are saying!

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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