Is There Now An Opportunity In The Estée Lauder Companies Inc. (NYSE:EL)?

By
Simply Wall St
Published
March 15, 2022
NYSE:EL
Source: Shutterstock

The Estée Lauder Companies Inc. (NYSE:EL) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$372 at one point, and dropping to the lows of US$250. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Estée Lauder Companies' current trading price of US$250 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Estée Lauder Companies’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Estée Lauder Companies

Is Estée Lauder Companies still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 8.45% above my intrinsic value, which means if you buy Estée Lauder Companies today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $230.87, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Estée Lauder Companies’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Estée Lauder Companies?

earnings-and-revenue-growth
NYSE:EL Earnings and Revenue Growth March 15th 2022

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Estée Lauder Companies' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in EL’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on EL, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 2 warning signs with Estée Lauder Companies, and understanding these should be part of your investment process.

If you are no longer interested in Estée Lauder Companies, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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