Estee Lauder Companies Inc (EL)

Return on total capital

		Jun 30, 2025	Mar 31, 2025	Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	131,000	557,000	782,000	986,000	1,145,000	1,364,000	1,149,000	1,064,000	1,592,000	1,603,000	1,968,000	2,811,000	3,100,000	4,147,000	4,066,000	3,822,000	3,601,000	1,973,000	1,780,000	1,638,000
Long-term debt	US$ in thousands	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Total stockholders’ equity	US$ in thousands	3,865,000	4,345,000	4,169,000	5,084,000	5,314,000	5,744,000	5,712,000	5,342,000	5,585,000	5,877,000	5,902,000	5,517,000	5,590,000	6,150,000	6,218,000	6,081,000	6,057,000	5,528,000	5,421,000	4,452,000
Return on total capital		3.39%	12.82%	18.76%	19.39%	21.55%	23.75%	20.12%	19.92%	28.50%	27.28%	33.34%	50.95%	55.46%	67.43%	65.39%	62.85%	59.45%	35.69%	32.84%	36.79%

June 30, 2025 calculation

Return on total capital = EBIT (ttm) ÷ (Long-term debt + Total stockholders’ equity)
= $131,000K ÷ ($—K + $3,865,000K)
= 3.39%

The analysis of Estee Lauder Companies Inc's return on total capital (ROTC) over the presented period reveals significant fluctuations and evolving trends. Initially, the company demonstrated a high level of profitability, with ROTC reaching 36.79% as of September 30, 2020. This figure slightly declined to 32.84% by the end of 2020 but remained relatively stable through the first quarter of 2021 at 35.69%.

A notable increase is observed during the second quarter of 2021, when the ROTC surged to 59.45%, followed by further growth reaching 62.85% in September 2021 and 65.39% at the close of 2021. This upward trajectory indicates a period of heightened efficiency in generating returns on capital, perhaps driven by improved operational performance, favorable market conditions, or strategic initiatives that enhanced profitability.

However, the trend shifts markedly starting in the first quarter of 2022, where ROTC peaks at 67.43%, followed by a declining trajectory over subsequent periods. By June 2022, it declined to 55.46%, which further decreased to 50.95% in September 2022, and continued downward to 33.34% at the end of 2022. This downward movement indicates a reduction in the company's ability to generate returns relative to its total capital base.

The decline persisted into 2023, with the ROTC figures diminishing to 27.28% in the first quarter, 28.50% in the second quarter, and notably decreasing further to 19.92% in the third quarter. The fourth quarter of 2023 saw a slight recovery to 20.12%, yet the level remains substantially lower than earlier peaks. The trend continues into early 2024, with the ROTC at 23.75% in the first quarter before declining again to 21.55% in the second quarter and reaching 19.39% in the third quarter. The values into the end of 2024 continue on a downward path, with the year-end figure at 18.76%.

The most recent data for 2025 shows a continued decline, with the ROTC dropping to 12.82% in the first quarter and further plunging to 3.39% in the second quarter. This persistent downward trend suggests a significant reduction in the company's ability to generate returns on its overall capital base over the period analyzed, possibly reflecting challenges such as market saturation, increased competition, cost pressures, or shifts in operational efficiencies.

Overall, the analysis indicates that Estee Lauder Companies Inc experienced a peak in return on total capital in late 2021, followed by a sustained decline through 2022 and into 2025. The pattern reflects notable concerns regarding long-term profitability and capital efficiency, warranting further investigation into the underlying causes behind these trends.