- This article examines whether Estée Lauder Companies is attractively priced after a difficult period in the market, or whether the stock could still face further downside, by focusing on what the current share price might imply about value.
- The stock last closed at US$69.12, with a 0.9% decline over 7 days, a 30.0% decline over 30 days, a 35.3% decline year to date, a 20.7% gain over 1 year, and declines of 69.7% over 3 years and 75.1% over 5 years. Together, these figures present a mixed picture for anyone comparing recent and longer term performance.
- Recent headlines have focused on Estée Lauder Companies' position in global beauty and skincare, including coverage of brand performance and its efforts to maintain market relevance across regions. This context has influenced how investors view the balance of risk and potential reward behind the share price movements seen over recent months.
- On Simply Wall St's valuation checks, Estée Lauder Companies scores a 3 out of 6. The sections that follow will explain what that means using different valuation approaches, then conclude with a more holistic way to think about what the market might be pricing in.
Approach 1: Estée Lauder Companies Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model estimates what a business might be worth by projecting its future cash flows and then discounting them back to today’s value using a required rate of return.
For Estée Lauder Companies, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $917.3 million. Analysts provide explicit free cash flow estimates for the next few years, and Simply Wall St then extends these with its own extrapolations out to 2035. The projection for 2028 is $1,478.5 million, and the discounted values for the 2026 to 2035 period range from about $509.5 million to $1,002.4 million per year, all expressed in US$.
When all those discounted cash flows are added together, the model arrives at an estimated intrinsic value of about $97.66 per share. Compared with the recent share price of $69.12, this implies Estée Lauder Companies trades at a 29.2% discount to this particular DCF estimate. On this measure alone, the shares appear potentially undervalued.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Estée Lauder Companies is undervalued by 29.2%. Track this in your watchlist or portfolio, or discover 62 more high quality undervalued stocks.
Approach 2: Estée Lauder Companies Price vs Sales
For companies where earnings can be uneven, the P/S ratio is often a useful cross check because it compares the share price with the revenue the business generates, rather than its reported profit.
What counts as a reasonable P/S ratio depends on how investors view the company’s growth outlook and risk profile. Higher expected growth or lower perceived risk can justify a higher multiple, while lower growth or higher risk usually supports a lower one.
Estée Lauder Companies currently trades on a P/S of 1.70x. This is close to the peer average of 1.70x and above the Personal Products industry average of 0.87x. Simply Wall St’s Fair Ratio for Estée Lauder Companies is 1.98x. This is its proprietary view of what a suitable P/S might be after considering factors such as earnings growth, industry, profit margins, market cap and company specific risks.
Comparing to the Fair Ratio can be more informative than relying only on peers or the broad industry. It adjusts for company characteristics instead of assuming that all businesses deserve similar multiples. With the actual P/S of 1.70x below the Fair Ratio of 1.98x, the shares screen as potentially undervalued on this measure.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Estée Lauder Companies Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St’s Community page let you attach a clear story about Estée Lauder Companies to the numbers by linking your view of its future revenue, earnings and margins to a forecast and then to a fair value. This updates automatically when fresh news or earnings arrive and provides a simple decision-making framework by comparing that fair value with today’s share price, whether you lean closer to a more optimistic view around a US$130 fair value, a cautious stance nearer US$65, or something in between such as the US$105.91 analyst consensus.
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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