Elizabeth Arden Freshens Up For 2009

1. I expect that analysts could raise their estimates in response, and disseminate some positive research, which should draw both retail and institutional interest in the shares. (To learn more, read Can Earnings Guidance Accurately Predict The Future?)
   
   
2. Second, I've been quite concerned about the potential for tax loss selling later in the year. The stock is well off its 52-week high. This optimistic outlook might draw interest in the stock, and that should limit some tax loss selling. This news comes at a good time. Of course whether it's able to actually mute tax loss selling remains to be seen. (To make the strategy work for you, read Selling Losing Securities For A Tax Advantage.)

Valuation Hard To Ignore
At the end of last week, rival beauty company Estee Lauder (NYSE:EL) released its earnings, and they were stellar. Estee Lauder beat estimates by a nickel, and for fiscal 2009, the company expects earnings per share of $2.57-$2.72 and net sales growth of 6-8%. That's generally in line with the $2.66 per share that analysts had been expecting.

This means the Estee Lauder trades at about 19.3-times that estimate. Not too shabby, given that the company is expected to grow at an 11.5% pace per year over the next five years.

However, I'd rather place a wager on Elizabeth Arden, which is expected to grow at 11.5% per annum in the next five years but Lizzy trades at about 11.7 times the current 2009 estimate of $1.61 per share. This discrepancy in valuation could draw in investors, particularly institutions that are looking to pick up shares on the cheap. Given the still uncertain economy, I also prefer buying the stock with the lower multiple, and I think that others may as well.

Bottom Line
Elizabeth Arden's fourth-quarter results were lackluster, but its outlook for 2009 piqued my interest. The shares look even more attractive on a forward P/E basis when compared with industry rival Estee Lauder.