Watch Out: Barbarians At The Gate For Estee Lauder Companies (EL)

Trade-Ideas LLC identified Estee Lauder Companies (EL) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate
By TheStreet Wire ,

Trade-Ideas LLC identified

Estee Lauder Companies

(

EL

) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Estee Lauder Companies as such a stock due to the following factors:

  • EL has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $229.9 million.
  • EL has traded 511,117 shares today.
  • EL traded in a range 265.2% of the normal price range with a price range of $3.45.
  • EL traded above its daily resistance level (quality: 79 days, meaning that the stock is crossing a resistance level set by the last 79 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on EL:

The Estee Lauder Companies Inc. manufactures, markets, and sells skin care, makeup, fragrance, and hair care products worldwide. The stock currently has a dividend yield of 1.2%. EL has a PE ratio of 29. Currently there are 16 analysts that rate Estee Lauder Companies a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Estee Lauder Companies has been 2.3 million shares per day over the past 30 days. Estee Lauder Companies has a market cap of $18.4 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.10 and a short float of 5.5% with 4.11 days to cover. Shares are up 5.6% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com

Analysis:

TheStreet Quant Ratings

rates Estee Lauder Companies as a

buy

. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • The current debt-to-equity ratio, 0.45, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.26, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has significantly increased by 52.62% to $558.30 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 32.14%.
  • The gross profit margin for LAUDER (ESTEE) COS INC is currently very high, coming in at 85.09%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, EL's net profit margin of 6.06% significantly trails the industry average.
  • LAUDER (ESTEE) COS INC's earnings per share declined by 39.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, LAUDER (ESTEE) COS INC reported lower earnings of $2.83 versus $3.05 in the prior year. This year, the market expects an improvement in earnings ($3.16 versus $2.83).
  • EL, with its decline in revenue, slightly underperformed the industry average of 2.6%. Since the same quarter one year prior, revenues slightly dropped by 7.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.

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