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Estee Lauder (EL) Soars To A 52-Week High, Time To Cash Out?

Published 03/11/2018, 09:52 PM
Updated 07/09/2023, 06:31 AM

Have you been paying attention to shares of The Estee Lauder Companies, Inc. (NYSE:EL) ? Shares have been on the move with the stock up 10.34% over the past month. EL hit a new 52-week high of $145.41 in the previous session. Estee Lauder has gained 14% since the start of the year compared to the -2.91% move for the Consumer Staples sector and the 9.2% year-to-date return for its peer group.

What's Driving the Outperformance?

The stock has a fantastic record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on February 2, 2018, Estee Lauder reported EPS of $1.52 versus the Zacks Consensus Estimate of $1.44 while it beat the consensus revenue estimate by 1.93%.

For the current fiscal year, Estee Lauder is expected to post earnings of $4.36 per share on $13.43 billion in revenues. This represents a 25.65% change in EPS on a 13.57% change in revenues. For the next fiscal year, the company is expected to earn $4.94 per share on $14.42 billion in revenues. This represents changes of 13.34% and 7.35%, respectively.

Valuation Metrics

While EL has moved to its 52-week high in the recent past, investors need to be asking, what is next for the company? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Estee Lauder has a Value Score of D. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 33.28x current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 29.81x versus its peer group's average of 15.3x. Additionally, the stock has a PEG ratio of 2.56. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Estee Lauder currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 and Style Scores of A or B, it looks as if Estee Lauder meets the list of requirements. Thus, it seems as though EL shares could have potential in the weeks and months to come.



Estee Lauder Companies, Inc. (The) (EL): Free Stock Analysis Report

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