Intrinsic value of Estee Lauder Cl A - EL

Previous Close

$105.92

  Intrinsic Value

$69.75

stock screener

  Rating & Target

sell

-34%

  Value-price divergence*

-17%

Previous close

$105.92

 
Intrinsic value

$69.75

 
Up/down potential

-34%

 
Rating

sell

 
Value-price divergence*

-17%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of EL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 38.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.47
  7.50
  7.25
  7.02
  6.82
  6.64
  6.48
  6.33
  6.20
  6.08
  5.97
  5.87
  5.78
  5.71
  5.64
  5.57
  5.51
  5.46
  5.42
  5.38
  5.34
  5.30
  5.27
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
  5.12
Revenue, $m
  11,262
  12,107
  12,984
  13,897
  14,845
  15,830
  16,856
  17,922
  19,033
  20,189
  21,394
  22,650
  23,961
  25,328
  26,755
  28,246
  29,804
  31,432
  33,134
  34,916
  36,779
  38,730
  40,772
  42,911
  45,152
  47,500
  49,960
  52,539
  55,242
  58,076
  61,048
Variable operating expenses, $m
 
  10,294
  11,031
  11,797
  12,594
  13,422
  14,283
  15,179
  16,112
  17,084
  18,096
  19,028
  20,129
  21,278
  22,477
  23,729
  25,038
  26,406
  27,836
  29,332
  30,898
  32,537
  34,253
  36,050
  37,932
  39,904
  41,971
  44,137
  46,409
  48,790
  51,287
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  9,652
  10,294
  11,031
  11,797
  12,594
  13,422
  14,283
  15,179
  16,112
  17,084
  18,096
  19,028
  20,129
  21,278
  22,477
  23,729
  25,038
  26,406
  27,836
  29,332
  30,898
  32,537
  34,253
  36,050
  37,932
  39,904
  41,971
  44,137
  46,409
  48,790
  51,287
Operating income, $m
  1,610
  1,813
  1,953
  2,099
  2,251
  2,409
  2,572
  2,743
  2,921
  3,106
  3,298
  3,622
  3,831
  4,050
  4,278
  4,517
  4,766
  5,026
  5,298
  5,583
  5,881
  6,193
  6,520
  6,862
  7,220
  7,595
  7,989
  8,401
  8,833
  9,287
  9,762
EBITDA, $m
  2,025
  2,137
  2,292
  2,453
  2,620
  2,794
  2,975
  3,163
  3,359
  3,563
  3,776
  3,998
  4,229
  4,470
  4,722
  4,986
  5,260
  5,548
  5,848
  6,163
  6,492
  6,836
  7,196
  7,574
  7,970
  8,384
  8,818
  9,273
  9,750
  10,251
  10,775
Interest expense (income), $m
  79
  78
  95
  112
  129
  148
  167
  187
  207
  229
  251
  274
  299
  324
  351
  378
  407
  437
  469
  502
  536
  572
  610
  650
  691
  734
  780
  827
  877
  930
  984
Earnings before tax, $m
  1,555
  1,735
  1,859
  1,988
  2,122
  2,261
  2,406
  2,557
  2,713
  2,877
  3,047
  3,348
  3,533
  3,726
  3,928
  4,138
  4,359
  4,589
  4,830
  5,081
  5,345
  5,621
  5,910
  6,212
  6,529
  6,861
  7,209
  7,574
  7,956
  8,357
  8,777
Tax expense, $m
  434
  468
  502
  537
  573
  610
  650
  690
  733
  777
  823
  904
  954
  1,006
  1,060
  1,117
  1,177
  1,239
  1,304
  1,372
  1,443
  1,518
  1,596
  1,677
  1,763
  1,852
  1,946
  2,045
  2,148
  2,256
  2,370
Net income, $m
  1,115
  1,266
  1,357
  1,451
  1,549
  1,650
  1,756
  1,866
  1,981
  2,100
  2,224
  2,444
  2,579
  2,720
  2,867
  3,021
  3,182
  3,350
  3,526
  3,709
  3,902
  4,103
  4,314
  4,535
  4,766
  5,009
  5,263
  5,529
  5,808
  6,101
  6,408

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,383
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  9,223
  8,431
  9,042
  9,677
  10,337
  11,024
  11,738
  12,481
  13,254
  14,059
  14,898
  15,773
  16,686
  17,638
  18,632
  19,670
  20,755
  21,888
  23,074
  24,314
  25,612
  26,971
  28,393
  29,883
  31,443
  33,078
  34,791
  36,587
  38,469
  40,443
  42,513
Adjusted assets (=assets-cash), $m
  7,840
  8,431
  9,042
  9,677
  10,337
  11,024
  11,738
  12,481
  13,254
  14,059
  14,898
  15,773
  16,686
  17,638
  18,632
  19,670
  20,755
  21,888
  23,074
  24,314
  25,612
  26,971
  28,393
  29,883
  31,443
  33,078
  34,791
  36,587
  38,469
  40,443
  42,513
Revenue / Adjusted assets
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
  1.436
Average production assets, $m
  1,873
  2,010
  2,155
  2,307
  2,464
  2,628
  2,798
  2,975
  3,159
  3,351
  3,551
  3,760
  3,977
  4,204
  4,441
  4,689
  4,947
  5,218
  5,500
  5,796
  6,105
  6,429
  6,768
  7,123
  7,495
  7,885
  8,293
  8,721
  9,170
  9,641
  10,134
Working capital, $m
  1,544
  533
  571
  611
  653
  697
  742
  789
  837
  888
  941
  997
  1,054
  1,114
  1,177
  1,243
  1,311
  1,383
  1,458
  1,536
  1,618
  1,704
  1,794
  1,888
  1,987
  2,090
  2,198
  2,312
  2,431
  2,555
  2,686
Total debt, $m
  2,242
  2,307
  2,722
  3,152
  3,600
  4,065
  4,549
  5,053
  5,577
  6,123
  6,692
  7,285
  7,904
  8,549
  9,223
  9,927
  10,663
  11,431
  12,235
  13,076
  13,956
  14,877
  15,841
  16,851
  17,909
  19,018
  20,179
  21,397
  22,673
  24,011
  25,415
Total liabilities, $m
  5,651
  5,716
  6,131
  6,561
  7,009
  7,474
  7,958
  8,462
  8,986
  9,532
  10,101
  10,694
  11,313
  11,958
  12,632
  13,336
  14,072
  14,840
  15,644
  16,485
  17,365
  18,286
  19,250
  20,260
  21,318
  22,427
  23,588
  24,806
  26,082
  27,420
  28,824
Total equity, $m
  3,572
  2,715
  2,912
  3,116
  3,329
  3,550
  3,780
  4,019
  4,268
  4,527
  4,797
  5,079
  5,373
  5,679
  5,999
  6,334
  6,683
  7,048
  7,430
  7,829
  8,247
  8,685
  9,143
  9,622
  10,125
  10,651
  11,203
  11,781
  12,387
  13,023
  13,689
Total liabilities and equity, $m
  9,223
  8,431
  9,043
  9,677
  10,338
  11,024
  11,738
  12,481
  13,254
  14,059
  14,898
  15,773
  16,686
  17,637
  18,631
  19,670
  20,755
  21,888
  23,074
  24,314
  25,612
  26,971
  28,393
  29,882
  31,443
  33,078
  34,791
  36,587
  38,469
  40,443
  42,513
Debt-to-equity ratio
  0.628
  0.850
  0.930
  1.010
  1.080
  1.150
  1.200
  1.260
  1.310
  1.350
  1.390
  1.430
  1.470
  1.510
  1.540
  1.570
  1.600
  1.620
  1.650
  1.670
  1.690
  1.710
  1.730
  1.750
  1.770
  1.790
  1.800
  1.820
  1.830
  1.840
  1.860
Adjusted equity ratio
  0.279
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322
  0.322

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,115
  1,266
  1,357
  1,451
  1,549
  1,650
  1,756
  1,866
  1,981
  2,100
  2,224
  2,444
  2,579
  2,720
  2,867
  3,021
  3,182
  3,350
  3,526
  3,709
  3,902
  4,103
  4,314
  4,535
  4,766
  5,009
  5,263
  5,529
  5,808
  6,101
  6,408
Depreciation, amort., depletion, $m
  415
  324
  338
  353
  369
  386
  403
  420
  439
  458
  478
  376
  398
  420
  444
  469
  495
  522
  550
  580
  611
  643
  677
  712
  750
  788
  829
  872
  917
  964
  1,013
Funds from operations, $m
  2,014
  1,590
  1,695
  1,805
  1,918
  2,036
  2,159
  2,287
  2,420
  2,558
  2,702
  2,820
  2,977
  3,140
  3,311
  3,490
  3,677
  3,872
  4,076
  4,289
  4,512
  4,746
  4,991
  5,247
  5,516
  5,797
  6,092
  6,401
  6,725
  7,065
  7,421
Change in working capital, $m
  225
  37
  39
  40
  42
  43
  45
  47
  49
  51
  53
  55
  58
  60
  63
  66
  69
  72
  75
  78
  82
  86
  90
  94
  99
  103
  108
  113
  119
  125
  131
Cash from operations, $m
  1,789
  1,553
  1,657
  1,764
  1,876
  1,993
  2,114
  2,240
  2,371
  2,507
  2,649
  2,764
  2,919
  3,080
  3,249
  3,424
  3,608
  3,800
  4,001
  4,211
  4,430
  4,660
  4,901
  5,153
  5,417
  5,694
  5,984
  6,288
  6,606
  6,940
  7,290
Maintenance CAPEX, $m
  0
  -187
  -201
  -216
  -231
  -246
  -263
  -280
  -298
  -316
  -335
  -355
  -376
  -398
  -420
  -444
  -469
  -495
  -522
  -550
  -580
  -611
  -643
  -677
  -712
  -750
  -788
  -829
  -872
  -917
  -964
New CAPEX, $m
  -525
  -137
  -146
  -151
  -157
  -164
  -170
  -177
  -184
  -192
  -200
  -209
  -217
  -227
  -237
  -247
  -259
  -270
  -283
  -296
  -309
  -324
  -339
  -355
  -372
  -390
  -408
  -428
  -449
  -471
  -493
Cash from investing activities, $m
  -1,269
  -324
  -347
  -367
  -388
  -410
  -433
  -457
  -482
  -508
  -535
  -564
  -593
  -625
  -657
  -691
  -728
  -765
  -805
  -846
  -889
  -935
  -982
  -1,032
  -1,084
  -1,140
  -1,196
  -1,257
  -1,321
  -1,388
  -1,457
Free cash flow, $m
  520
  1,229
  1,310
  1,397
  1,488
  1,583
  1,681
  1,783
  1,889
  1,999
  2,114
  2,201
  2,325
  2,456
  2,591
  2,733
  2,881
  3,035
  3,196
  3,365
  3,541
  3,726
  3,919
  4,121
  4,333
  4,555
  4,787
  5,030
  5,285
  5,552
  5,833
Issuance/(repayment) of debt, $m
  608
  397
  414
  431
  448
  465
  484
  504
  524
  546
  569
  593
  619
  646
  674
  704
  735
  769
  804
  841
  880
  921
  964
  1,010
  1,058
  1,108
  1,162
  1,218
  1,276
  1,338
  1,403
Issuance/(repurchase) of shares, $m
  -890
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -182
  397
  414
  431
  448
  465
  484
  504
  524
  546
  569
  593
  619
  646
  674
  704
  735
  769
  804
  841
  880
  921
  964
  1,010
  1,058
  1,108
  1,162
  1,218
  1,276
  1,338
  1,403
Total cash flow (excl. dividends), $m
  316
  1,626
  1,724
  1,828
  1,936
  2,048
  2,165
  2,286
  2,413
  2,545
  2,683
  2,794
  2,944
  3,101
  3,265
  3,437
  3,616
  3,804
  4,000
  4,206
  4,421
  4,647
  4,883
  5,131
  5,391
  5,663
  5,948
  6,248
  6,562
  6,891
  7,236
Retained Cash Flow (-), $m
  71
  -194
  -197
  -205
  -213
  -221
  -230
  -239
  -249
  -259
  -270
  -282
  -294
  -307
  -320
  -334
  -349
  -365
  -382
  -399
  -418
  -437
  -458
  -480
  -502
  -526
  -552
  -578
  -606
  -636
  -666
Prev. year cash balance distribution, $m
 
  1,051
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  2,483
  1,528
  1,624
  1,723
  1,827
  1,935
  2,047
  2,164
  2,286
  2,413
  2,512
  2,650
  2,794
  2,945
  3,102
  3,267
  3,439
  3,618
  3,807
  4,003
  4,210
  4,425
  4,652
  4,888
  5,137
  5,397
  5,669
  5,955
  6,255
  6,570
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  2,381
  1,398
  1,413
  1,419
  1,416
  1,404
  1,383
  1,353
  1,313
  1,265
  1,193
  1,131
  1,063
  989
  911
  830
  748
  666
  586
  509
  435
  367
  305
  249
  200
  157
  122
  92
  68
  49
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

The Estée Lauder Companies Inc. manufactures and markets skin care, makeup, fragrance, and hair care products worldwide. The company offers a range of skin care products, such as moisturizers, serums, cleansers, toners, body care, exfoliators, acne and oil correctors, facial masks, cleansing devices, and sun care products; and makeup products for face, eyes, lips, and nails, as well as related items, including compacts, brushes, and other makeup tools. It also provides fragrance products in various forms comprising eau de parfum sprays and colognes, lotions, powders, creams, candles, and soaps; and hair care products, which include shampoos, conditioners, styling products, treatment, finishing sprays, and hair color products, as well as sells ancillary products and services. The company offers its products under the brands of Estée Lauder, Aramis, Clinique, Lab Series, Origins, M·A·C, Bobbi Brown, La Mer, Aveda, Jo Malone London, Bumble and bumble, Darphin, Smashbox, RODIN olio lusso, Le Labo, Editions de Parfums Frédéric Malle, GLAMGLOW, By Kilian, Prescriptives, GoodSkin Labs, Ojon, and Osiao. In addition, it operates as a licensee for fragrances and/or cosmetics sold under the Tommy Hilfiger, Donna Karan New York, DKNY, Michael Kors, Tom Ford, Ermenegildo Zegna, Tory Burch, Dr. Andrew Weil, and AERIN brand names. The company sells its products through department stores, specialty multi-brand retailers, upscale perfumeries, pharmacies, and salons and spas; freestanding stores; e-commerce Websites; stores in airports and on cruise ships; in-flight and duty-free shops; and self-select outlets. The Estée Lauder Companies Inc. was founded in 1946 and is based in New York, New York.

FINANCIAL RATIOS  of  Estee Lauder Cl A (EL)

Valuation Ratios
P/E Ratio 34.9
Price to Sales 3.5
Price to Book 10.9
Price to Tangible Book
Price to Cash Flow 21.8
Price to Free Cash Flow 30.8
Growth Rates
Sales Growth Rate 4.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 11%
Cap. Spend. - 3 Yr. Gr. Rate 2.6%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 53.5%
Total Debt to Equity 62.8%
Interest Coverage 21
Management Effectiveness
Return On Assets 13.4%
Ret/ On Assets - 3 Yr. Avg. 14.7%
Return On Total Capital 20.1%
Ret/ On T. Cap. - 3 Yr. Avg. 21.8%
Return On Equity 30.9%
Return On Equity - 3 Yr. Avg. 31.2%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 80.6%
Gross Margin - 3 Yr. Avg. 80.5%
EBITDA Margin 18.2%
EBITDA Margin - 3 Yr. Avg. 19.1%
Operating Margin 14.3%
Oper. Margin - 3 Yr. Avg. 15.3%
Pre-Tax Margin 13.8%
Pre-Tax Margin - 3 Yr. Avg. 14.8%
Net Profit Margin 9.9%
Net Profit Margin - 3 Yr. Avg. 10.3%
Effective Tax Rate 27.9%
Eff/ Tax Rate - 3 Yr. Avg. 30%
Payout Ratio 37.9%

EL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the EL stock intrinsic value calculation we used $11262 million for the last fiscal year's total revenue generated by Estee Lauder Cl A. The default revenue input number comes from 2016 income statement of Estee Lauder Cl A. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our EL stock valuation model: a) initial revenue growth rate of 7.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for EL is calculated based on our internal credit rating of Estee Lauder Cl A, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Estee Lauder Cl A.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of EL stock the variable cost ratio is equal to 85.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for EL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.1% for Estee Lauder Cl A.

Corporate tax rate of 27% is the nominal tax rate for Estee Lauder Cl A. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the EL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for EL are equal to 16.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Estee Lauder Cl A operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for EL is equal to 4.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $3572 million for Estee Lauder Cl A - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 365.854 million for Estee Lauder Cl A is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Estee Lauder Cl A at the current share price and the inputted number of shares is $38.8 billion.

RELATED COMPANIES Price Int.Val. Rating
COTY Coty Cl A 19.23 100.68  str.buy
AVP Avon Products 2.62 0.28  str.sell
REV Revlon Cl A 17.45 69.70  str.buy
IPAR Inter Parfums 37.75 68.65  str.buy
PG Procter&Gamble 92.47 51.93  sell

COMPANY NEWS

▶ Estee Lauder tops Street 4Q forecasts   [Aug-18-17 09:00PM  Associated Press]
▶ Estee Lauder: No Deal For You?   [Aug-11-17 12:52PM  Barrons.com]
▶ Estee Lauder: Will Asia Fear Undo Stock's Rise?   [Aug-10-17 03:51PM  Barrons.com]
▶ The impact of millennials across the market   [Aug-09-17 07:43PM  CNBC Videos]
▶ 4 Stocks to Watch In August   [Jul-31-17 09:25AM  ACCESSWIRE]
▶ Here Are The Winners And Losers From Amazon's Reported Violet Grey Deal   [Jul-26-17 04:29PM  Investor's Business Daily]
▶ Stocks Generating Improved Relative Strength: Estee Lauder   [03:00AM  Investor's Business Daily]
▶ Estee Lauder Still In Buy Zone; Earns IBD Rating Upgrade   [12:28PM  Investor's Business Daily]
▶ Bloggers Spur Estee Lauder's Sales in China   [May-31-17 11:10PM  Bloomberg Video]
▶ Bet on beauty stocks?   [May-26-17 05:21PM  CNBC Videos]
▶ Why Ulta Beauty Shares Fell Out Of Buy Range Ahead Of Earnings   [May-24-17 04:17PM  Investor's Business Daily]
▶ The 3 Best Dividend Stocks in Beauty Products   [May-20-17 10:00AM  Motley Fool]
▶ Beauty Companies Eye Millennial Customer Base   [May-10-17 05:11PM  Investopedia]
▶ Consumer Stocks That Have Weathered the Storm   [May-08-17 11:55AM  Investopedia]
▶ How Estee Lauder Lured in Millennials   [May-04-17 10:39AM  Investopedia]
▶ Ulta Beauty Shares Break Out As Estee Lauder Pops On Earnings   [04:26PM  Investor's Business Daily]
▶ Cramer's Stop Trading: Estee Lauder   [09:55AM  CNBC Videos]
▶ Estee Lauder tops Street 3Q forecasts   [06:54AM  Associated Press]
▶ Piper Jaffray Starts Coverage on Beauty Companies   [May-01-17 11:04PM  Investopedia]
Stock chart of EL Financial statements of EL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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