EL 100.29 (-0.74%)
US5184391044Consumer Packaged GoodsHousehold & Personal Products

Last update on 2024-06-05

Estee Lauder Companies (EL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Estee Lauder Companies Piotroski F-Score Analysis 2023: Comprehensive evaluation of financial health with a final score of 4/9.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 4

We're running Estee Lauder Companies (EL) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

We analyzed Estee Lauder Companies (EL) using the Piotroski F-Score, which assesses a company's financial strength based on nine criteria: profitability, liquidity, and operating efficiency. EL scored 4 out of 9. Despite positive net income, positive cash flow, a higher operating cash flow than net income, and a reduction in shares outstanding, EL has declining ROA, increasing leverage, a decreasing current ratio and gross margin, and a falling asset turnover ratio, indicating mixed financial health.

Insights for Value Investors Seeking Stable Income

Estee Lauder's Piotroski score of 4 suggests cautious consideration for investment. While the company shows some strength in profitability and cash flow, the declining efficiency metrics and rising leverage reflect potential risks. Investors should view this stock with caution and perhaps look into other factors like market conditions and strategic future plans before deciding.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Estee Lauder Companies (EL)

Company has a positive net income?

Net income is a key indicator of a company's profitability. A positive net income indicates that the company is generating more revenue than its costs, contributing to shareholder equity.

Historical Net Income of Estee Lauder Companies (EL)

For the Estee Lauder Companies (EL), the net income in 2023 is reported at $1,006,000,000, which is positive. Examining the historical net income over the past 20 years shows that Estee Lauder has maintained a generally upward trend, although there were some fluctuations. The highest net income recorded during this period was $2,870,000,000 in 2021, and the lowest was $218,400,000 in 2009, likely influenced by the financial crisis. With a positive net income in 2023, Estee Lauder fulfills this criterion and receives 1 point.

Company has a positive cash flow?

Positive cash flow from operations (CFO) is crucial as it indicates a company's ability to generate sufficient revenue to maintain and grow operations.

Historical Operating Cash Flow of Estee Lauder Companies (EL)

Estee Lauder Companies (EL) has a positive CFO of 1,731 million USD in 2023, marking a significant indicator of financial health. Over the last 20 years, Estee Lauder's CFO has shown a general trend of consistent growth, peaking in 2021 at 3,631 million USD. Though there's a decline in 2023, the maintaining of a positive CFO suggests that the company continues to generate enough cash through its core activities, adding 1 point in the Piotroski score.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's profitability relative to its total assets. The change in ROA is essential to determine how efficiently a company is utilizing its assets to generate profits. An increasing ROA indicates improving efficiency, which is favorable for investors.

Historical change in Return on Assets (ROA) of Estee Lauder Companies (EL)

Estee Lauder Companies (EL) displayed a decrease in ROA from 0.1115 in 2022 to 0.0454 in 2023. This decrease is unfavorable since it suggests that the company has become less efficient in using its assets to generate profits. Considering the historical performance, Estee Lauder's ROA has been fluctuating, showing values as high as 0.257 in 2018 and now falling significantly below the industry median of 0.4411 in 2023. The industry's median ROA of 0.4411 further highlights Estee Lauder's underperformance. With ROA on a downward trend and well below the industry standard, Estee Lauder receives 0 points for this criterion as per the Piotroski F-Score methodology.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income indicates strong cash generation capacity, reflecting health in core operations.

Historical accruals of Estee Lauder Companies (EL)

Estee Lauder Companies' (EL) Operating Cash Flow for 2023 stands at $1,731 million, significantly higher than its Net Income of $1,006 million. This yields a positive score for this criterion, adding 1 point. **Historical Context:** Over the past 20 years, Estee Lauder's Operating Cash Flow has closely followed its fluctuating Net Income, but the consistent higher cash flow is a sign of its sustainable core operations and financial health. For instance, in 2021, Operating Cash Flow was $3,631 million compared to Net Income of $2,870 million, showing consistent performance. **Trend Analysis:** - 2023: OCF $1,731M > NI $1,006M - 2022: OCF $3,040M > NI $2,390M - 2021: OCF $3,631M > NI $2,870M This trend is favorable, suggesting Estee Lauder's ability to generate cash consistently exceeds its accounting profits, reflecting underlying financial robustness.

Liquidity of Estee Lauder Companies (EL)

Leverage is declining?

Leverage evaluates the proportion of a company's debt compared to its equity, signalling financial risk.

Historical leverage of Estee Lauder Companies (EL)

In 2022, Estee Lauder Companies (EL) had a leverage ratio of 0.3353, which increased to 0.3765 in 2023. This rising leverage indicates that the company has taken on more debt relative to its equity, highlighting a potential increase in financial risk. Historical data shows a fluctuating leverage trend, peaking notably in 2020 at 0.4045. The consistent ups and downs suggest periods of debt accumulation and repayment, but the recent uptick in 2023 warrants caution. Given this increase, no point is awarded for lower leverage as it demonstrates heightened financial risk.

Current Ratio is growing?

Current ratio measures a company's ability to pay short-term obligations or those due within one year. A higher ratio indicates more liquidity, showing the company easily manages its short-term liabilities.

Historical Current Ratio of Estee Lauder Companies (EL)

The Current Ratio for Estee Lauder Companies (EL) has decreased from 1.599 in 2022 to 1.4646 in 2023. Although a decline in current ratio may signal a slight reduction in liquidity, EL's ratio is still fairly close to the industry median of 1.5029. Historical data shows fluctuations with a peak of 2.3461 in 2014, indicating EL has had stronger liquidity in the past. Given the trend and industry context, this metric can be seen as stable but indicating a need for attention on short-term liabilities handling. Hence, the point for this criterion is set to 0.

Number of shares not diluted?

The criterion assesses changes in the number of shares outstanding. A decrease is favorable as it often signifies share buybacks, indicating management's belief in undervaluation or value creation for shareholders.

Historical outstanding shares of Estee Lauder Companies (EL)

In 2023, The Estée Lauder Companies (NYSE: EL) had 357,900,000 outstanding shares, down from 360,000,000 in 2022. This decrease is favorable under the Piotroski Score, adding 1 point. Share buybacks are a strong signal of managerial confidence. The trend over 20 years also shows significant buybacks from 469,400,000 shares in 2003, reinforcing a positive long-term perspective. As share buybacks can enhance earnings per share (EPS) and indicate excess cash flow, this tendency reflects good financial health and prudent capital allocation strategies by Estee Lauder's management team.

Operating of Estee Lauder Companies (EL)

Cross Margin is growing?

Gross Margin represents the percentage of revenue that exceeds the cost of goods sold, reflecting the core profitability of company operations.

Historical gross margin of Estee Lauder Companies (EL)

Comparing Estee Lauder Companies, Inc. (EL)'s Gross Margin between 2022 and 2023, it is evident that the margin has decreased from 0.7573 to 0.7131. This indicates a reduction in profitability in terms of core operations. The score, therefore, is allocated 0 points. Estee Lauder's decreasing margin, when aligned with the industry metrics, reveals an exceeding trend where their gross margin is still significantly higher than the industry median gross margin of 0.4411 for 2023. This suggests that despite the margin reduction, Estee Lauder remains competitively strong in its profitability within the industry context.

Asset Turnover Ratio is growing?

Asset Turnover is a financial efficiency metric indicating the ratio of revenue to total assets and measures how effectively a company uses its assets to generate sales.

Historical asset turnover ratio of Estee Lauder Companies (EL)

The Asset Turnover ratio of Estee Lauder decreased from 0.8273 in 2022 to 0.7179 in 2023. This decline indicates a reduction in how efficiently the company utilizes its assets to generate revenues. A consistent decrease, as observed over recent years (0.9241 in 2020 to 0.8158 in 2021 and 0.8273 in 2022), reflects less efficient asset utilization, which may be worrying for investors. Over a 20-year span, Estee Lauder’s Asset Turnover has shown a downtrend, from highs above 1.5 in the early 2000s to below 0.8 in recent years, signaling potential structural inefficiencies or changes in business operations and market conditions.


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