Yahoo Finance Estée Lauder Companies (NYSE:EL) stock falls 6.5% in past week as three-year earnings and shareholder returns continue downward trend
Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term The Estée Lauder Companies Inc. (NYSE:EL) shareholders. Sadly for them, the share price is down 66% in that time. And more recent buyers are having a tough time too, with a drop of 46% in the last year. The falls have accelerated recently, with the share price down 30% in the last three months.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
Check out our latest analysis for Estée Lauder Companies
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Estée Lauder Companies saw its EPS decline at a compound rate of 22% per year, over the last three years. The share price decline of 31% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. Of course, with a P/E ratio of 59.52, the market remains optimistic.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
Estée Lauder Companies shareholders are down 45% for the year (even including dividends), but the market itself is up 23%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Estée Lauder Companies (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.
Estée Lauder Companies is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
