Estee Lauder Cos Inc Stock Buy Recommendation Reiterated (EL)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Estee Lauder Cos (NYSE: EL) has been reiterated by TheStreet Ratings as a buy with a ratings score of B+. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

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Highlights from the ratings report include:
  • LAUDER (ESTEE) COS INC has improved earnings per share by 36.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, LAUDER (ESTEE) COS INC increased its bottom line by earning $2.16 versus $1.74 in the prior year. This year, the market expects an improvement in earnings ($2.59 versus $2.16).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Personal Products industry average. The net income increased by 37.1% when compared to the same quarter one year prior, rising from $130.40 million to $178.80 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 6.0%. Since the same quarter one year prior, revenues slightly increased by 1.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The current debt-to-equity ratio, 0.42, 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 1.46, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has slightly increased to $279.10 million or 7.55% when compared to the same quarter last year. In addition, LAUDER (ESTEE) COS INC has also modestly surpassed the industry average cash flow growth rate of 2.18%.

The Estee Lauder Companies Inc. engages in the manufacture, marketing, and sale of skin care, makeup, fragrance, and hair care products worldwide. Estee Lauder Cos has a market cap of $16.7 billion and is part of the consumer goods sector and consumer non-durables industry. The company has a P/E ratio of 28.00, above the S&P 500 P/E ratio of 18.00. Shares are up 17.5% year to date as of the close of trading on Tuesday.

You can view the full Estee Lauder Cos Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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