If Cosmetics Companies are Recession Proof, Should You Be Buying Their Stocks?

by Fred Fuld III

You may have heard that the beauty industry is immune to recessions. Here are some reasons why.

  • Cosmetics are a necessity for many people. Even during tough economic times, people still want to look their best. Cosmetics can help people feel more confident and put-together, which can be especially important during times of stress.
  • Cosmetics are a relatively affordable luxury. Compared to other discretionary spending, such as travel or entertainment, cosmetics are relatively inexpensive. This makes them an attractive option for people who are trying to save money during a recession.
  • The cosmetic industry is constantly innovating. New products and trends are always emerging, which keeps consumers interested and spending. This makes the cosmetic industry less vulnerable to economic downturns than other industries that are more stagnant.

Of course, no industry is completely recession-proof. However, the cosmetic industry is generally considered to be more recession-resistant than other industries. This is due to the factors listed above.

Here are some additional points to consider:

  • Cosmetics can be a way to boost morale. During tough times, people may be looking for ways to improve their mood. Cosmetics can be a way to do this, as they can make people feel more confident and attractive.
  • Cosmetics can be a way to express oneself. People may use cosmetics to express their personal style or to reflect their mood. This can be especially important during times of change or uncertainty.

Overall, the cosmetic industry is a relatively resilient industry that is not as vulnerable to economic downturns as other industries.

So if makeup companies are so good for surviving a recession, there are several stocks that are involved in this arena.

Coty Inc. (COTY) is a French-American multinational beauty company founded in 1904 by François Coty. With its subsidiaries, it develops, manufactures, markets, and distributes fragrances, cosmetics, skin care, nail care, and both professional and retail hair care products. Coty is one of the leading beauty companies in the world. The company has a portfolio of over 70 brands, and it operates in over 150 countries. Coty is committed to innovation, and it is constantly developing new products and services. Coty is a respected brand that is known for its high-quality products and its innovative marketing campaigns.

The stock has a fairly high price to earnings ratio of 67 but trades at a more reasonable 26 times earnings. Quarterly earnings growth year-over-year were up an incredible 108% on an 8.7% increase in sales.

e.l.f. Beauty, Inc.(ELF) is a cosmetics company based in Oakland, California. The company was founded in 2004 by Joseph Shamah and Scott D. Weiss. e.l.f. stands for “Eyes Lips Face,” which reflects the company’s focus on affordable, high-quality cosmetics.

e.l.f. Beauty sells its products through a variety of channels, including its own website, e-commerce retailers, and brick-and-mortar stores. The company’s products are also available in over 60 countries worldwide.

e.l.f. Beauty is known for its affordable prices, its wide range of products, and its commitment to cruelty-free and vegan cosmetics. The company has been praised by consumers and critics alike for its high-quality products and its innovative marketing campaigns.

In recent years, e.l.f. Beauty has experienced rapid growth. In 2015, the company’s revenue was $100 million. By 2021, revenue had grown to $578.84 million. e.l.f. Beauty is now one of the leading cosmetics companies in the United States.

The stock has a trailing P/E ratio of 95 and a forward P/E of 50. Earnings per share quarter over quarter were 891.30% on a 78.30% rise in revenues.

The Estée Lauder Companies Inc. (EL) reported a net profit of $1.091 billion for the twelve months ending March 31, 2023. This represents a decline of 67.49% from the net profit of $3.48 billion reported for the twelve months ending March 31, 2022.

The decline in profit was due to a number of factors, including:

  • A 12.42% decline in revenue for the twelve months ending March 31, 2023, to $15.862 billion.
  • Increased costs, including marketing and advertising expenses.
  • Impairment charges related to certain discontinued operations.

Despite the decline in profit, The Estée Lauder Companies Inc. remains a profitable company. The company’s strong brands, global reach, and focus on innovation position it well for continued growth in the years to come.

Here is a table showing The Estée Lauder Companies Inc.’s net profit for the past three years:

YearNet Profit (in millions)
20231.091
20223.48
20212.87

With a forward P/E of 37 , this is one of the few cosmetics companies that pays a dividend. The current yield is 1.38%.

Ulta Beauty, Inc. (ULTA) is a leading beauty retailer in the United States. The company operates over 1,300 stores across the country, and it also sells products online through its website and mobile app. Ulta Beauty offers a wide variety of beauty products, including cosmetics, fragrance, skin care, hair care, and salon services.

Ulta Beauty was founded in 1990, and it has grown rapidly in recent years. The company’s revenue has increased from $1.5 billion in 2009 to $14.3 billion in 2022. Ulta Beauty is now the largest beauty retailer in the United States, and it is the second-largest beauty retailer in the world.

The stock has one of the most favorable earnings ratios of the group, trading at 18 times trailing earnings and 17 times forward earnings.

A couple more makeup companies worth looking at which trade over-the-counter are the French company L’Oréal S.A. (LRLCY) with a P/E of 39 and a yield of 1.48%, and the Japanese company Shiseido Company, Limited (SSDOY) trading at 73 times earnings and yielding 1.54%.

Maybe some of these companies can make your portfolio look better.

Disclosure: Author didn’t own any of the above at the time the article was written.

Cosmetics Stocks are Looking Good

by Fred Fuld III

Did you happen to see what Coty (COTY) did during last several days? You could have bought the stock last week for a little above $7 per share. By Tuesday of this week, the stock jumped to over 11 per share, and increase of over 50%! Not a bad return for just a few days. Of course, it helped that Coty reported better than expected earnings of $0.24 per share versus an estimate of $0.222.

Coty is the New York City based beauty products company, that sells such brands as Burberry, Calvin Klein, Cavalli, Chloe, Davidoff, Escada, Gucci, Hugo Boss, Jil Sander, Joop!, Lacoste, Marc Jacobs, Miu Miu, philosophy, Stella McCartney, and Tiffany & Co. The stock trades at 18 times forward earnings and pays a very beautiful yield of 4.5%.

Just look through any women’s magazines and you will notice that the cosmetics, makeup, and skincare industry is tremendous. You will probably see 16 pages of ads, mostly for beauty products, before you even get to the table of contents.

Estee Lauder Companies Inc. (EL) has various brands including Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, American Beauty, and Bobbi Brown. The forward P/E ratio is 33 and the yield on the stock is 1.1%. Unfortunately the price sales ratio is a bit high at 4.04. However, diluted earnings per share for the latest quarter were $1.55 per share, up from $0.33 per share a year ago.

Avon Products Inc. (AVP) is a well known network marketing company which sells cosmetics, fragrances, skin care, and toiletries, along with various other products. They recently reported that their first-quarter profits nearly tripled. Avon’s forward P/E ratio is 37. It does not pay a dividend.

Revlon Inc. (REV) sells cosmetics, skincare products, perfume, and other personal care products through mass volume retailers, pharmacies, supermarkets, and department stores. The stock trades at 15.5 times forward earnings, and does not pay a dividend.

L’Oreal Co. ADR (LRLCY), based in Paris, France, is the largest cosmetics company in the world. The company markets such brands as PureOlogy Research, Redken, Lancôme, Yves Saint Laurent Beauté, Giorgio Armani Beauty, Ralph Lauren Fragrances, Maybelline, and numerous others. It has a forward P/E of 29 and a pretty decent yield of 1.7%.

Shiseido Co. Ltd. (SSDOY), based in Japan, is the oldest cosmetics company in the world, founded in 1872. Their products include Pureness, The Skincare, Benefiance, Bio-Performance, Suncare, and White Lucent. The stock trades at 30 times forward earnings and pays a small dividend of 0.5%.

The large conglomerates, such as Unilever NV (UN) and Procter & Gamble Co. (PG), have been excluded, as cosmetics only make up a small portion of their revenues.

Maybe some of these cosmetic stocks can make your portfolio looking a bit more attractive.

Disclosure: Author didn’t own any of the above at the time the article was written.

Corporate Earnings Announcements for Week 3 of August

Looking for some interesting moves in some stocks this upcoming week? Check out the companies that will be reporting earnings this week.

If earnings exceed analysts’ expectations, the stocks can shoot up. If the numbers underperform, the stock can tank. Then again, occasionally, stocks don’t move the way you would have expected.

Anyway, many traders use earnings plays for trading strategies. Also, option traders look for high implied volatility of stocks for for option selling strategies.

Here are many of the enormous number of stocks reporting earnings this week:

Monday

ALRM

AU
DAVE
SYY
 
Tuesday
 
AAP
BHP
COTY
CREE
HD
URBN
Wednesday
A
AEO
ADI
CSCO
SPLS
TGT
Thursday
 
AMAT
DV
GPS
WMT
 
Friday
 
DE
EL

FL

If you like interesting stock lists like this, be sure to check out many of the free stock lists at WallStreetNewsNetwork.com.