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.