Estée Lauder’s Valuation: How Does It Compare?



Relative valuation

Estée Lauder (EL) is trading at a higher valuation than the S&P 500 (IVV) (SPY) (VOO) and the Dow Jones Industrial Average (DIA). Estée Lauder is trading at a forward PE (price-to-earnings) multiple of 28.4x. In comparison, the S&P 500 and the Dow Jones Industrial Average are trading at forward PE multiples of 17.0x and 15.8x, respectively. All of the valuations are as of March 15, 2016.

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Peer group valuation

Peers Procter & Gamble (PG) and L’Oréal (LRLCY) are trading at lower PE multiples of 21.6x and 25.2x, respectively. Coty (COTY) is trading at a forward valuation of 26.6x. Avon (AVP) is trading at the lowest forward PE multiple of 17.3x. EL is trading at a higher valuation due to its recent acquisition of By Kilian, which will help the company broaden its luxury portfolio of fragrances. To learn more about the deal, please read Coty Buys 43 Procter & Gamble Brands: What Investors Should Know.

EPS guidance

Estée Lauder expects diluted EPS (earnings per share) between $3.07 and $3.12, including $0.04 dilution from acquisitions. Increased currency headwinds are projected to affect EPS by about $0.29, which is $0.05 higher than the last guidance.

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E-commerce and various other channels

With the growing demand in the direct-to-consumer business, EL is focusing on accelerating the development of e-commerce sites and freestanding stores in several markets. According to CEO and president Fabrizio Freda, the holiday quarter was a valuable time for e-commerce as more consumers opted for the convenience of shopping online. EL’s electronic and mobile commerce businesses generated nearly 30% growth in the quarter.

Estée Lauder plans to increase investments in its core areas of business, makeup and skincare. These investments will be supported by more advertising, innovation, and expansion through freestanding stores, e-commerce sites, omni-channel pilots, and travel. This will help the company to continue with profitable growth in the second half of fiscal 2016.


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