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The Estée Lauder Companies Inc.

Autor:   •  December 5, 2018  •  793 Words (4 Pages)  •  36 Views

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benchmark ratio of 25.8%, indicates that the company can earn about 31 cents on every dollar invested by shareholders. The higher ratio shows the higher rate of return to shareholders.

Basic Earning Power of 17.5% means on every dollar spend to purchase assets, the company can generate around 18 cents in the operating income (or EBIT).

IV. Market Value:

1. P/E ratio 28.40 24.10

2. Price to book ratio 9.37 -15.47

Analysis: P/E ratio of the company is higher than the benchmark ratio (28.4 compares to 24.1), which means the market is more willing to pay for a stock of the Estee Lauder Co. based on its current earnings. The P/E ratio also helps investors analyze how much they should pay for a stock based on its current earnings.

Price to book ratio of 9.37 indicates that the market price per share of The Estee Lauder Co. is greater than 9.37 times its book value per share. Comparing to the industry ratio of -15.47, we can tell that the business has healthier future profit projections than competitors, and the investors are willing to pay a premium for that possibility.

Overall performance analysis:

Overall, The Estee Lauder Companies Inc. operated relatively efficiently and achieved pretty good ratios compared to the industry ratios during the 2016 fiscal year. Liquidity ratios are high enough to ensure that the company can afford to make required payments in a short-term. Asset management ratios are a litter lower than the benchmark because the company could not match the amounts of inventory purchased and the amounts of sales. If the company could not sell greater amounts of inventory, it would incur storage costs and other holding costs. Debt management ratios indicate that the company has more creditor financing than investor financing. However, its EBIT is high enough to pay its interest payments when they come due. Profitability ratios show that the company can create high returns from every dollar invested by shareholders and borrowed from creditors. Nevertheless, to receive one dollar of dividend, shareholders of The Estee Lauder Companies Inc. have to pay $28 to buy its share.

In my opinion, this is a profitable investment because shareholders can not only be paid dividends but also get profit when selling shares.


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