Is Estée Lauder’s Recent 38% Rally Signaling a Shift in Its Market Value for 2025?

Wondering whether Estée Lauder Companies is worth a spot in your portfolio right now? You are definitely not alone. The stock has experienced an interesting ride lately, catching the eye of many investors who are evaluating their next move. While Estée Lauder has traditionally been seen as a powerhouse in the beauty and personal care space, recent price action suggests growing questions about the company's immediate prospects, and perhaps some optimism about a potential turnaround.

Over the last three months, Estée Lauder's share price has surged by nearly 38%, which may be encouraging for those looking for positive signs after a stretch of volatility. However, the stock is still coming off a tough few years and has lagged the broader market with five-year returns around -57%. A look at the fundamentals shows some positive momentum, with annual net income growth of almost 49% and over 3% revenue growth, but there is also a recent negative net income figure that keeps the debate going among analysts.

If you are reviewing valuation metrics, Estée Lauder scores a 4 out of 6 on undervaluation checks. This is a strong showing, though not definitive. Analysts still see some potential upside, with a price target of $89.39 and the current price at $87.72, representing a discount of just over 2% to the analyst consensus and about a 22% discount according to intrinsic value models.

Curious about how these valuation scores are calculated and what they really mean for investors? Next, we will break down the six key valuation checks behind Estée Lauder's score and explore how each method frames the current opportunity, followed by a perspective on valuation you might not have considered.

Estée Lauder Companies delivered -1.9% returns over the last year. See how this stacks up to the rest of the Personal Products industry.

Approach 1: Estée Lauder Companies Cash Flows

The Discounted Cash Flow (DCF) model is a popular way to value a company, as it estimates the business’s worth by projecting future cash flows and discounting them back to today’s dollars. In other words, it tries to answer how much Estée Lauder’s current and future profits are worth if you received them all right now.

At present, Estée Lauder is generating a Last Twelve Months Free Cash Flow of $483 million. Looking ahead, analysts and internal estimates forecast this to rise steadily, with projected Free Cash Flow reaching about $3.06 billion by 2035. Over ten years, annual Free Cash Flow is expected to increase each year, reflecting the company’s anticipated recovery and growth potential.

Based on these projections, the DCF calculation suggests an intrinsic fair value for Estée Lauder of $112.85 per share. With current shares trading around $87.72, the DCF model implies that the stock is 22.3% undervalued relative to its intrinsic value.

This means that, if these forecasts play out, Estée Lauder’s shares could present meaningful upside from today’s levels, according to the cash flow approach.

Result: UNDERVALUED

Our DCF analysis suggests Estée Lauder Companies is undervalued by 22.3%. Track this in your watchlist or portfolio, or discover more undervalued stocks based on DCF analysis.

Approach 2: Estée Lauder Companies Price vs Sales

The Price-to-Sales (P/S) multiple is a straightforward way to value companies, especially in sectors like Personal Products, where profits can fluctuate but sales provide a steady measure of business activity. For companies with inconsistent earnings or in periods of transition, P/S offers a clearer picture than profit-based ratios. This makes it a preferred metric in this context.

Typically, a company’s P/S ratio reflects expectations for growth as well as the level of risk investors are willing to accept. Higher growth prospects or lower risk can justify a higher P/S, while lower growth or higher risk will often result in a lower fair multiple.

Estée Lauder Companies currently trades at a P/S multiple of 2.20x. This is below the peer average of 2.50x but significantly above the industry average of 1.05x for Personal Products. The proprietary Fair Ratio, which blends factors such as growth forecasts, profit margins, market cap, and sector risk, is calculated to be 2.41x for Estée Lauder.

Since the difference between Estée Lauder’s current P/S multiple and its Fair Ratio is less than 0.10, the stock appears to be appropriately valued on this metric. This suggests that the market’s expectations for sales and growth are largely reflected in the current share price.

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

Beyond numbers and ratios, a Narrative is a simple, story-driven way for you to connect what you believe about Estée Lauder Companies, such as its future earnings potential or sales growth, to your own forecast and estimate of fair value.

With a Narrative, you do not just crunch data; you combine your insights and expectations into a clear story that links the company’s business outlook to a concrete forecast, and then directly to a fair value for its shares.

This approach transforms investing from picking stocks based solely on historical figures into understanding the “why” behind each move. This process is made accessible to everyone through Simply Wall St’s tools and is shared by millions of users in the community.

Narratives help you decide when to buy or sell by letting you easily compare your fair value (what the company is worth based on your story) to its current market price, guiding smarter, more tailored investment decisions.

Because Narratives are updated as new information, such as company news or earnings announcements, emerges, you always have an up-to-date, relevant view of your investment case.

For example, some investors may see Estée Lauder Companies as worth $120 per share based on strong digital growth and global expansion, while others see only $56 due to concerns about ongoing competition and restructuring costs. This shows how Narratives capture distinct perspectives on the same stock.

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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