Beauty Stocks – You Should Have a Look at
Beauty stocks generally show strong resilience and therefore contribute to the industry’s broad appeal.
In the past year, the S&P 500 Consumer Staples Sector Index showed a total return of 3.6%, contrasting with the S&P 500 Consumer Discretionary Sector Index, which saw a -14.1% return. Meanwhile, the Russell 1000 experienced a -12.5% return.
While not direct benchmarks for the cosmetics market, these figures can help gauge the performance of cosmetics stocks, noting that these sectors cover a broader range of companies beyond just cosmetics.
The following analysis highlights the top cosmetics stocks, focusing on those offering the best value, showcasing strong growth, and demonstrating superior performance in the cosmetics industry.
Beauty Stocks with the most hedge fund investors
Our analysis uses Insider Monkey’s database of 943 hedge funds to identify the top 14 beauty and cosmetics stocks with the most hedge fund investors.
Waldencast plc (NASDAQ:WALD) sees interest from 7 hedge funds after signing a deal to acquire a 60% stake in its Southeast Asian distributor. Analyst Ashley Helgans of Jefferies gave the stock a Buy rating with an $11.5 price target. Grove Collaborative Holdings, Inc. (NYSE:GROV), an e-commerce retailer of natural beauty products, had 13 hedge fund backers with a total investment of $5.8 million. European Wax Center, Inc. (NASDAQ:EWCZ), offering waxing services, had 16 hedge fund holders. Its Q4 revenue grew by 18.6% year over year. Olaplex Holdings, Inc. (NASDAQ:OLPX) faces pressure after a disappointing Q4 report. Cowen downgraded the stock to Market Perform, citing soft demand in 2023. Edgewell Personal Care Company (NYSE:EPC) surpassed Q1 estimates and expects a 2% to 4% sales increase for the year. Unilever PLC (NYSE:UL) saw 22 hedge funds invest, with its quarterly dividend increasing by 8.6%. The Beauty Health Company (NASDAQ:SKIN) is known for HydraFacial, attracting 24 hedge funds. Coty Inc coty (NYSE:COTY) received positive comments from Deutsche Bank, highlighting its undervalued status. e.l.f. Beauty, Inc. (NYSE:ELF) impressed with a 200% gain over the past year, with 29 hedge funds invested.Fastest Growing Beauty Stocks
We rank the top cosmetics stocks using a growth model that combines a 50/50 weighting of their most recent quarterly year-over-year (YOY) revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are vital for a company’s success. Relying on just one growth metric could mislead due to possible accounting anomalies like tax law changes or restructuring costs in a particular quarter.
Fastest Growing Cosmetics Stocks
Company Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%) Olaplex Holdings Inc. (OLPX) 11.81 7.7 70.7 38.6 e.l.f. Beauty Inc. (ELF) 39.51 2.1 80.0 26.3 Ulta Beauty Inc. (ULTA) 421.47 21.6 25.0 16.8Source: YCharts
Beauty Stocks Top Picks
The Estée Lauder Companies Inc. (NYSE:EL), a cosmetics giant, had 44 hedge funds interested, led by Fundsmith LLP with a $1.4 billion investment.
Ulta Beauty stands out in cosmetics retail, with steady sales growth and a unique advantage from its in-store hair salons.
L’Oreal, the world’s largest cosmetics company, has diversified its brand portfolio and invested heavily in e-commerce.
Interparfums specializes in fragrances, operating above pre-pandemic levels and continuing to expand its brand partnerships.
These companies, from giants to niche players, represent the best investment opportunities in the beauty industry, according to hedge fund interest and market performance.
Particularity of the basic consumer goods market
The definition of consumer staples is: items that consumers are unwilling or unable to cut from their budget, regardless of their financial situation.
This includes food, drinks, hygiene and personal care products, household items as well as alcohol and tobacco. One of the advantages of this sector is that it is non-cyclical, meaning that products are in demand all year round, without a strong link to the season.
Cosmetic and hygiene products are also in demand at a relatively constant level, which generally means slow and steady growth for businesses.
The beauty sector stays strong despite economic challenges
Analysts credit this resilience to consumer demand for products enhancing appearance and well-being. Luxury brands and affordable options alike contribute to the industry’s broad appeal. For instance, e.l.f. Beauty, Inc. in California saw a 50% revenue increase in the fiscal third quarter and raised its financial outlook. CEO Tarang Amin noted no slowdown in demand even in the recession, with certain product categories seeing growth.
The beauty market has been growing, even as other sectors struggle with inflation and interest rate hikes.
A Wall Street Journal report noted a 5% increase in mass-market cosmetics sales in Q3 2023, driven by volume and pricing.
However, the beauty industry faces challenges, such as consumer cutbacks on discretionary spending, affecting company forecasts. NielsenIQ reported a 2.1% drop in face care item sales year-over-year.
In this tough environment, companies with budget-friendly offerings are doing well. Giants in beauty and cosmetics rely on low-priced products to balance out losses from luxury items.
L’Oreal’s CEO Nicolas Hieronimus mentioned relying on Maybelline and L’Oreal Paris for consumers unable to afford expensive mascara.
How to invest in beauty and aesthetics?
The simplest way is to invest in companies that are already established and recognized. It is possible to invest in manufacturing and distribution companies, but also in beauty salons and wellness institutes.
It’s important to study the sector carefully before any investment and to study the performance of each company, their history, price to earnings ratio, net revenue per fiscal year development potential.
It is also possible to invest in companies at the start of the process. In this case, you will need to pay particular attention to the management team and the business model. Investing in beauty and aesthetics start-ups is higher risk, but can be very profitable if successful.
Finally, it is possible to invest directly in beauty products and cosmetics. This can be done by purchasing shares of companies like L’Oréal or Estée Lauder, or by investing in specialized funds.
The big cosmetics brands are safe bets and generally have a solid development strategy. They are also well established in emerging countries, which represent a growing market.
The post Beauty Stocks – You Should Have a Look at appeared first on FinanceBrokerage.
