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The three-year shareholder returns and company earnings persist lower as Estée Lauder Companies (NYSE:EL) stock falls a further 6.3% in past week

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term The Estée Lauder Companies Inc. (NYSE:EL) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 52% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 40% in the last year. On top of that, the share price is down 6.3% in the last week.

With the stock having lost 6.3% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See 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).

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During the three years that the share price fell, Estée Lauder Companies' earnings per share (EPS) dropped by 20% each year. This change in EPS is reasonably close to the 22% average annual decrease in the share price. So it seems like sentiment towards the stock hasn't changed all that much over time. It seems like the share price is reflecting the declining earnings per share.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
earnings-per-share-growth

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on Estée Lauder Companies' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Investors in Estée Lauder Companies had a tough year, with a total loss of 39% (including dividends), against a market gain of about 28%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.8% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 4 warning signs for Estée Lauder Companies (2 are concerning) that you should be aware of.

Estée Lauder Companies is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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.