Estee Lauder ($EL) Stock Analysis: Michael Burry’s Great Value Investment? Buy on Trade War Worries?

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After a generally bad environment for beauty especially in China, Estee Lauder (NYSE: EL) is getting to some very interesting levels.

In case you don’t know them, Estee Lauder ($EL stock) is a high-end or luxury beauty company with brands in skin and hair care, fragrance and makeup. The revenue is split pretty much equally between The Americas, Europe, Middle East and Africa and Asia/Pacific. As we can see with any other luxury company, China represented quite an issue in the past years, even in 2024, when the sales dropped by like 11%. On top of that, they had some significant impairments in The Americas due to some acquisition from a few years ago. I think it’s probably better that they did this now, when the results would’ve been bad anyway, than in a couple of years when they would’ve scared the market for no reason.

Of course, in such an environment, EL’s margin and growth rates aren’t very reliable and there is a lot of volatility, which creates uncertainty that the market really hates. Combined with all the worries and generally kind of negative sentiment, we get the current prices.

Estee Lauder can make something like $2 billion, which is okay for a $25-30 billion market cap in this industry. The competition is at ratios of like 25-30, or even more, so getting to their level would basically be a 2x. However, now, with all the issues and stuff, they got to around $1.2 – $1.4 billion. That’s still not terrible and there is quite some room to improve and if they get back to that $2 billion again, then they’re really well below the industry, which the market probably wouldn’t keep like that. You know, even for them, a ratio of like 13-14 is like half the average, so a recovery would be quite a big deal.

Financially, we see an okay position, with the current assets covering the current liabilities but quite a bit of debt given the assets. They don’t really have assets other than the goodwill, intangibles and brand values that aren’t on the balance sheet. This is more about what a buyer would pay and it’s ultimately impossible for us to estimate. However, we see the maturities being in 2027, 28, 29 and going all the way through around 2053, so no year should be a burden.

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0:00 Estee Lauder ($EL) Stock Review
0:15 Estee Lauder ($EL) Stock Analysis
6:14 Estee Lauder ($EL) Stock Valuation + Buying Target

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