Stock Analysis

More money in the bank for insiders who divested US$11m worth of The Estée Lauder Companies Inc. (NYSE:EL) shares last year

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NYSE:EL
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Despite the fact that The Estée Lauder Companies Inc. (NYSE:EL) stock rose 10% last week, insiders who sold US$11m worth of stock in the previous 12 months are likely to be better off. Selling at an average price of US$259, which is higher than the current price, may have been the wisest decision for these insiders as their investment would have been worth less now than when they sold.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

Our analysis indicates that EL is potentially overvalued!

Estée Lauder Companies Insider Transactions Over The Last Year

The President, Fabrizio Freda, made the biggest insider sale in the last 12 months. That single transaction was for US$5.3m worth of shares at a price of US$268 each. While insider selling is a negative, to us, it is more negative if the shares are sold at a lower price. The good news is that this large sale was at well above current price of US$237. So it is hard to draw any strong conclusion from it.

Insiders in Estée Lauder Companies didn't buy any shares in the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume
NYSE:EL Insider Trading Volume December 7th 2022

If you like to buy stocks that insiders are buying, rather than selling, then you might just love this free list of companies. (Hint: insiders have been buying them).

Insider Ownership

For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Estée Lauder Companies insiders own about US$11b worth of shares (which is 13% of the company). Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

What Might The Insider Transactions At Estée Lauder Companies Tell Us?

It doesn't really mean much that no insider has traded Estée Lauder Companies shares in the last quarter. While we feel good about high insider ownership of Estée Lauder Companies, we can't say the same about the selling of shares. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. While conducting our analysis, we found that Estée Lauder Companies has 2 warning signs and it would be unwise to ignore them.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

What are the risks and opportunities for Estée Lauder Companies?

The Estée Lauder Companies Inc. manufactures, markets, and sells skin care, makeup, fragrance, and hair care products worldwide.

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Rewards

  • Earnings are forecast to grow 17.59% per year

Risks

  • Has a high level of debt

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Estée Lauder Companies

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