Over the last six months, Estée Lauder shares have sunk to $67, producing a disappointing 13.5% loss - worse than the S&P 500’s 1.9% drop. This might have investors contemplating their next move.
Is now the time to buy Estée Lauder, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Do We Think Estée Lauder Will Underperform?
Even with the cheaper entry price, we don't have much confidence in Estée Lauder. Here are three reasons why we avoid EL and a stock we'd rather own.
1. Core Business Falling Behind as Demand Declines
When analyzing revenue growth, we care most about organic revenue growth. This metric captures a business’s performance excluding one-time events such as mergers, acquisitions, and divestitures as well as foreign currency fluctuations.
Estée Lauder’s demand has been falling over the last eight quarters, and on average, its organic sales have declined by 2.6% year on year. 
2. Shrinking Operating Margin
Operating margin is a key profitability metric because it accounts for all expenses enabling a business to operate smoothly, including marketing and advertising, IT systems, wages, and other administrative costs.
Analyzing the trend in its profitability, Estée Lauder’s operating margin decreased by 12.1 percentage points over the last year. Estée Lauder’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers. Its operating margin for the trailing 12 months was negative 4.2%.
3. EPS Trending Down
We track the change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Estée Lauder, its EPS declined by 35.3% annually over the last three years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
Final Judgment
We cheer for all companies serving everyday consumers, but in the case of Estée Lauder, we’ll be cheering from the sidelines. After the recent drawdown, the stock trades at 30.6× forward P/E (or $67 per share). This valuation tells us a lot of optimism is priced in - we think there are better opportunities elsewhere. We’d recommend looking at the Amazon and PayPal of Latin America.
High-Quality Stocks for All Market Conditions
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
