Eyes On Estee Lauder Cos (EL): Highlighted Storm The Castle Stock

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 "storm the castle" (crossing above 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 $140.5 million.
  • EL has traded 894,385 shares today.
  • EL is trading at 2.88 times the normal volume for the stock at this time of day.
  • EL crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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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 1.3%. EL has a PE ratio of 25.3. Currently there are 10 analysts that rate Estee Lauder Cos a buy, 1 analyst rates it a sell, and 6 rate it a hold.

The average volume for Estee Lauder Cos has been 1.8 million shares per day over the past 30 days. Estee Lauder Cos has a market cap of $16.9 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 0.94 and a short float of 2.9% with 3.44 days to cover. Shares are down 3.4% 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 notable return on equity, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

Highlights from the ratings report include:
  • 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 83.43%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 8.66% is above that of the industry average.
  • Net operating cash flow has significantly increased by 327.09% to $127.70 million when compared to the same quarter last year. In addition, LAUDER (ESTEE) COS INC has also vastly surpassed the industry average cash flow growth rate of 29.87%.
  • EL, with its decline in revenue, slightly underperformed the industry average of 5.6%. Since the same quarter one year prior, revenues slightly dropped by 1.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Despite currently having a low debt-to-equity ratio of 0.35, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.49 is sturdy.


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