Have you been paying attention to shares of The Estee Lauder Companies (EL - Free Report) ? Shares have been on the move with the stock up 4.3% over the past month. The stock hit a new 52-week high of $192.97 in the previous session. The Estee Lauder Companies has gained 46.7% since the start of the year compared to the 19.2% move for the Zacks Consumer Staples sector and the 41.4% return for the Zacks Cosmetics industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 1, 2019, Estee Lauder reported EPS of $1.55 versus consensus estimate of $1.3 while it beat the consensus revenue estimate by 4.58%.
For the current fiscal year, Estee Lauder is expected to post earnings of $5.79 per share on $14.79 billion in revenues. Meanwhile, for the next fiscal year, the company is expected to earn $6.4 per share on $15.78 billion in revenues. This represents a year-over-year change of 10.89% and 6.75%, respectively.
Estee Lauder may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Estee Lauder has a Value Score of D. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 33X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 31.5X versus its peer group's average of 25.8X. Additionally, the stock has a PEG ratio of 2.54. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Estee Lauder currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Estee Lauder meets the list of requirements. Thus, it seems as though Estee Lauder shares could have potential in the weeks and months to come.