Estee Lauder a Gorgeous Value

Estee Lauder Companies (EL - Analyst Report) is the pre-eminent global leader in prestige beauty. The company has strong brands, market presence, and growth potential demonstrated by over 60 years of uninterrupted sales growth.

Even though the slowdown in consumer spending in the U.S. is expected to drive a sales decline in fiscal 2009, management has embarked on a four-year strategic plan that will build on the company's core strengths, sharpen execution capabilities and lower the cost base though fiscal 2013.

With the stock trading at the low-end of the historical valuation range, we maintain the Buy rating. Estee Lauder's stock has traded in a P/E range of 15.2 to 33.0 over the last five years, with the market decline in the fourth quarter driving the stock s P/E valuation down to 10.1. The company has excellent long-term growth prospects, in our view. The target price of $40.50 is based on a 30 P/E on our fiscal 2009 (depressed) earnings estimate.