Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Estée Lauder Cos. Inc. (NYSE:EL)

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Present Value of Free Cash Flow to Equity (FCFE)

Intermediate level

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company’s asset base.


Intrinsic Stock Value (Valuation Summary)

Estée Lauder Cos. Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel LibreOffice Calc
Year Value FCFEt or Terminal value (TVt) Calculation Present value at
01 FCFE0
1 FCFE1 = × (1 + )
2 FCFE2 = × (1 + )
3 FCFE3 = × (1 + )
4 FCFE4 = × (1 + )
5 FCFE5 = × (1 + )
5 Terminal value (TV5) = × (1 + ) ÷ ()
Intrinsic value of Estée Lauder Cos. Inc.’s common stock
 
Intrinsic value of Estée Lauder Cos. Inc.’s common stock (per share)
Current share price

Based on: 10-K (filing date: 2020-08-28).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

Microsoft Excel LibreOffice Calc
Assumptions
Rate of return on LT Treasury Composite1 RF
Expected rate of return on market portfolio2 E(RM)
Systematic risk of Estée Lauder Cos. Inc.’s common stock βEL
 
Required rate of return on Estée Lauder Cos. Inc.’s common stock3 rEL

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rEL = RF + βEL [E(RM) – RF]
= + []
=


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Estée Lauder Cos. Inc., PRAT model

Microsoft Excel LibreOffice Calc
Average Jun 30, 2020 Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015
Selected Financial Data (US$ in millions)
Common stock dividends
Net earnings attributable to The Estée Lauder Companies Inc.
Net sales
Total assets
Stockholders’ equity, The Estée Lauder Companies Inc.
Financial Ratios
Retention rate1
Profit margin2
Asset turnover3
Financial leverage4
Averages
Retention rate
Profit margin
Asset turnover
Financial leverage
 
FCFE growth rate (g)5

Based on: 10-K (filing date: 2020-08-28), 10-K (filing date: 2019-08-23), 10-K (filing date: 2018-08-24), 10-K (filing date: 2017-08-25), 10-K (filing date: 2016-08-24), 10-K (filing date: 2015-08-20).

2020 Calculations

1 Retention rate = (Net earnings attributable to The Estée Lauder Companies Inc. – Common stock dividends) ÷ Net earnings attributable to The Estée Lauder Companies Inc.
= () ÷ =

2 Profit margin = 100 × Net earnings attributable to The Estée Lauder Companies Inc. ÷ Net sales
= 100 × ÷ =

3 Asset turnover = Net sales ÷ Total assets
= ÷ =

4 Financial leverage = Total assets ÷ Stockholders’ equity, The Estée Lauder Companies Inc.
= ÷ =

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= × × × =


FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × ( × ) ÷ ( + ) =

where:
Equity market value0 = current market value of Estée Lauder Cos. Inc.’s common stock (US$ in millions)
FCFE0 = the last year Estée Lauder Cos. Inc.’s free cash flow to equity (US$ in millions)
r = required rate of return on Estée Lauder Cos. Inc.’s common stock


FCFE growth rate (g) forecast

Estée Lauder Cos. Inc., H-model

Microsoft Excel LibreOffice Calc
Year Value gt
1 g1
2 g2
3 g3
4 g4
5 and thereafter g5

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= + () × (2 – 1) ÷ (5 – 1) =

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= + () × (3 – 1) ÷ (5 – 1) =

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= + () × (4 – 1) ÷ (5 – 1) =