Estee Lauder Cos (EL) Roof Leaking Today

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Estee Lauder Cos ( EL) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Estee Lauder Cos 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 $102.1 million.
  • EL has traded 835,941 shares today.
  • EL is trading at 12.30 times the normal volume for the stock at this time of day.
  • EL crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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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 1.1%. EL has a PE ratio of 24.6. Currently there are 12 analysts that rate Estee Lauder Cos a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Estee Lauder Cos has been 1.6 million shares per day over the past 30 days. Estee Lauder Cos has a market cap of $17.5 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 0.99 and a short float of 2.7% with 4.44 days to cover. Shares are up 0.8% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Estee Lauder Cos as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income, notable return on equity, expanding profit margins 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.

Highlights from the ratings report include:
  • EL's revenue growth has slightly outpaced the industry average of 11.3%. Since the same quarter one year prior, revenues rose by 13.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Personal Products industry and the overall market, LAUDER (ESTEE) COS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for LAUDER (ESTEE) COS INC is currently very high, coming in at 84.31%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 9.45% is above that of the industry average.
  • Net operating cash flow has increased to $365.80 million or 25.23% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 15.00%.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Personal Products industry. The net income increased by 174.1% when compared to the same quarter one year prior, rising from $94.00 million to $257.70 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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