Estée Lauder has gotten torched over the last six months – since October 2024, its stock price has dropped 41.8% to $55.23 per share. This might have investors contemplating their next move.
Is there a buying opportunity in Estée Lauder, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Even with the cheaper entry price, we’re swiping left on Estée Lauder for now. Here are three reasons why there are better opportunities than EL and a stock we’d rather own.
Named after its founder, who was an entrepreneurial woman from New York with a passion for skincare, Estée Lauder (NYSE:EL) is a one-stop beauty shop with products in skincare, fragrance, makeup, sun protection, and men’s grooming.
When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding one-time events such as mergers, acquisitions, and divestitures as well as foreign currency fluctuations.
Estée Lauder’s demand has been falling over the last eight quarters, and on average, its organic sales have declined by 2.5% year on year.
Operating margin is a key profitability metric because it accounts for all expenses enabling a business to operate smoothly, including marketing and advertising, IT systems, wages, and other administrative costs.
Analyzing the trend in its profitability, Estée Lauder’s operating margin decreased by 9 percentage points over the last year. Estée Lauder’s performance was poor no matter how you look at it – it shows that costs were rising and it couldn’t pass them onto its customers. Its operating margin for the trailing 12 months was negative 2.7%.
We track the change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Estée Lauder, its EPS declined by 31.3% annually over the last three years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
Estée Lauder doesn’t pass our quality test. After the recent drawdown, the stock trades at 27× forward price-to-earnings (or $55.23 per share). This multiple tells us a lot of good news is priced in – you can find better investment opportunities elsewhere. Let us point you toward a dominant Aerospace business that has perfected its M&A strategy.
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