Estée Lauder Companies (The)

Methodology

Estée Lauder's prestige beauty business historically generated predictable earnings from brand power and travel retail, though recent China headwinds and strategic missteps create uncertainty. The portfolio of luxury cosmetics brands provides pricing power but faces channel disruption. Fair value calculations now require more conservative growth assumptions given operational challenges and changing beauty retail dynamics.

Methodology

Estée Lauder trades at compressed PEG ratios (1.0-2.0x) reflecting concerns about China market recovery, travel retail normalization, and competitive pressures from newer beauty brands. The company's heritage brands and innovation capabilities support long-term value. PEG appears attractive but reflects legitimate questions about return to historical double-digit growth rates.

Methodology

Estée Lauder pays a modest dividend yielding 2-3%, making PEGY somewhat more attractive than PEG during this challenging operational period. The company maintains conservative payout ratios with room for dividend growth as business stabilizes. Total return benefits from yield component while investors await management's turnaround execution.