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Watch These 4 Cosmetics Stocks as Industry Looks Radiant
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Companies in the Zacks Cosmetics industry have been benefiting from consumers’ rising demand for skincare and personal care products, given consumers’ growing inclination toward self-care. Robust online operations and a focus on bringing product newness have been working for companies like Coty Inc. (COTY - Free Report) , e.l.f. Beauty, Inc. (ELF - Free Report) , Inter Parfums, Inc. (IPAR - Free Report) and Helen of Troy Limited (HELE - Free Report) .
These upsides are helping cosmetic players stay firm amid headwinds related to cost inflation and supply-chain disruptions.
About the Industry
The Zacks Cosmetics industry includes companies providing beauty and personal care products. Players in the industry manufacture, distribute, sell and market skincare, fragrance, makeup and haircare products. Many firms in this space market via sales representatives, whereas some sell products through retailers, independent and chain drug stores and pharmacies, upscale perfumeries, department stores and beauty salons. The companies also operate through retailer websites, third-party distributors and in-flight and duty-free shops. Some products offered by the industry participants include moisturizers, serums, toners and cleansers under skincare, perfume sprays, candles and soaps under fragrance, lipsticks, mascaras, powders, eye shadows, foundation and nail polishes under makeup and shampoos, conditioner and hair color products under hair care.
Trends Shaping the Future of the Cosmetics Industry
Strong Demand for Skincare: The demand for skincare and other personal care products has been rising, which has been working well for cosmetics companies. Consumers’ increased focus on self-care and maintaining healthy skincare routines has been aiding growth in this category. Increased consumer awareness has also stimulated the demand for organic skincare and “clean beauty” products. To this end, players’ constant focus on innovation and bringing product newness has been working well. Players in the space are also seeing strength in the fragrance and haircare category, with product newness being a driver. Such upsides are likely to continue supporting the top-line performance of cosmetics companies
Innovation & Digitization Act as Major Drivers: Talking of beauty and skincare, companies have been coming up with unique product offerings, incorporating the latest technologies and expert scientific formulations. A focus on resonating with consumers’ evolving preferences has kept cosmetics players busy in terms of innovation and product launches. Some players have been fueling brand portfolios through prudent buyouts and strategic alliances. Moreover, cosmetics players have been focused on boosting e-commerce capabilities. Companies in the space have made significant progress, as evidenced by tools like virtual try, new digital payment solutions and digital marketing efforts.
Inflationary Headwinds: Companies in the cosmetics space are witnessing a dynamic inflation and supply-chain environment. Players have been grappling with supply-chain hurdles stemming from prolonged COVID-19-associated factors, congestion at ports and reduced airfreight capacity. These issues are inducing delays and resulting in increased freight costs. Companies have been witnessing higher SG&A costs as well. Elevated marketing expenses and increased investments in R&D and digital growth put pressure on SG&A costs. These factors pose threats to companies’ margins. Moreover, the impact of overall inflation on consumers’ discretionary spending is a concern.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Cosmetics industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #111, which places it in the top 44% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry vs. Broader Market
The Zacks Cosmetics industry has underperformed the Zacks S&P 500 composite and the broader Zacks Consumer Staples sector in the past year.
The industry has declined 10.8% over this period against the S&P 500’s growth of 20%. Meanwhile, the broader sector has risen 8.1% in the said time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month Price-to-earnings (P/E), which is commonly used for valuing consumer staple stocks, the industry is currently trading at 32.29X compared with the S&P 500’s 19.55X and the sector’s 18.3X.
In the past five years, the industry has traded as high as 45.92X, as low as 19.64X and at the median of 29.46X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
4 Cosmetics Stocks to Keep a Close Eye On
Coty: This manufacturer, marketer and distributor of beauty products presently sports a Zacks Rank #1 (Strong Buy). Coty has been benefiting from its focus on six strategic pillars aimed at sustainable growth. These include stabilizing Consumer Beauty make-up brands and mass fragrances, accelerating luxury fragrances and setting the company up as a core player in prestige make-up, establishing a skincare portfolio in prestige and mass channels, strengthening e-commerce and direct-to-consumer (DTC) capabilities, growing presence in China via Prestige and certain Consumer Beauty brands as well as setting COTY as an industry leader in sustainability. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Coty’s fiscal 2023 EPS has risen by a penny to 53 cents in the past 30 days. Shares of COTY have surged 76.7% in the past year. Coty has an expected EPS growth rate of 15.6% for three to five years.
Price and Consensus: COTY
e.l.f. Beauty: This provider of cosmetic and skincare products has been undertaking significant investments in its digital business, which is yielding well. ELF appears well-placed to benefit from its commitment to solidifying its brand portfolio through innovation. A focus on effective marketing strategies helps this Zacks Rank #3 (Hold) company reach new audiences and penetrate new platforms.
The Zacks Consensus Estimate for e.l.f. Beauty’s fiscal 2024 EPS has moved up 12.4% in the past 60 days to $4.81. The company’s stock has more than doubled in the past year. e.l.f. Beauty has an expected EPS growth rate of 12.8% for three to five years.
Price and Consensus: ELF
Inter Parfums: This Zacks Rank #3 company has been benefiting from growth across European and U.S. operations due to impressive brand performance. IPAR’s focus on innovation and product launches is a key driver. The company, which manufactures, distributes and markets a wide range of fragrances and related products, has been on track to expand its business through new licenses or acquisitions.
The Zacks Consensus Estimate for Inter Parfums’ 2023 EPS has moved up 6.3% to $4.25 per share over the past 60 days. Shares of Inter Parfums have surged a whopping 107.7% in the past year. IPAR has an expected EPS growth rate of 15% for three to five years.
Price and Consensus: IPAR
Helen of Troy: This provider of consumer products across the Beauty, Housewares and Health & Home segments has been gaining from its focus on strengthening the portfolio of its Leadership Brands. Helen of Troy is making major investments in key areas to continue driving growth. To this end, the company is investing in consumer-centric innovation, digital marketing and media, new packaging, enhanced production and distribution capacity and DTC channels, among others. This Zacks Rank #3 company’s focus on developing a global restructuring plan, Project Pegasus, looks promising.
The Zacks Consensus Estimate for Helen of Troy’s fiscal 2023 EPS has remained unchanged in the past 30 days at $8.75. Shares of HELE have declined 36% over the past year. The company has an expected EPS growth rate of 8% for three to five years.
Price and Consensus: HELE
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Watch These 4 Cosmetics Stocks as Industry Looks Radiant
Companies in the Zacks Cosmetics industry have been benefiting from consumers’ rising demand for skincare and personal care products, given consumers’ growing inclination toward self-care. Robust online operations and a focus on bringing product newness have been working for companies like Coty Inc. (COTY - Free Report) , e.l.f. Beauty, Inc. (ELF - Free Report) , Inter Parfums, Inc. (IPAR - Free Report) and Helen of Troy Limited (HELE - Free Report) .
These upsides are helping cosmetic players stay firm amid headwinds related to cost inflation and supply-chain disruptions.
About the Industry
The Zacks Cosmetics industry includes companies providing beauty and personal care products. Players in the industry manufacture, distribute, sell and market skincare, fragrance, makeup and haircare products. Many firms in this space market via sales representatives, whereas some sell products through retailers, independent and chain drug stores and pharmacies, upscale perfumeries, department stores and beauty salons. The companies also operate through retailer websites, third-party distributors and in-flight and duty-free shops. Some products offered by the industry participants include moisturizers, serums, toners and cleansers under skincare, perfume sprays, candles and soaps under fragrance, lipsticks, mascaras, powders, eye shadows, foundation and nail polishes under makeup and shampoos, conditioner and hair color products under hair care.
Trends Shaping the Future of the Cosmetics Industry
Strong Demand for Skincare: The demand for skincare and other personal care products has been rising, which has been working well for cosmetics companies. Consumers’ increased focus on self-care and maintaining healthy skincare routines has been aiding growth in this category. Increased consumer awareness has also stimulated the demand for organic skincare and “clean beauty” products. To this end, players’ constant focus on innovation and bringing product newness has been working well. Players in the space are also seeing strength in the fragrance and haircare category, with product newness being a driver. Such upsides are likely to continue supporting the top-line performance of cosmetics companies
Innovation & Digitization Act as Major Drivers: Talking of beauty and skincare, companies have been coming up with unique product offerings, incorporating the latest technologies and expert scientific formulations. A focus on resonating with consumers’ evolving preferences has kept cosmetics players busy in terms of innovation and product launches. Some players have been fueling brand portfolios through prudent buyouts and strategic alliances. Moreover, cosmetics players have been focused on boosting e-commerce capabilities. Companies in the space have made significant progress, as evidenced by tools like virtual try, new digital payment solutions and digital marketing efforts.
Inflationary Headwinds: Companies in the cosmetics space are witnessing a dynamic inflation and supply-chain environment. Players have been grappling with supply-chain hurdles stemming from prolonged COVID-19-associated factors, congestion at ports and reduced airfreight capacity. These issues are inducing delays and resulting in increased freight costs. Companies have been witnessing higher SG&A costs as well. Elevated marketing expenses and increased investments in R&D and digital growth put pressure on SG&A costs. These factors pose threats to companies’ margins. Moreover, the impact of overall inflation on consumers’ discretionary spending is a concern.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Cosmetics industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #111, which places it in the top 44% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry vs. Broader Market
The Zacks Cosmetics industry has underperformed the Zacks S&P 500 composite and the broader Zacks Consumer Staples sector in the past year.
The industry has declined 10.8% over this period against the S&P 500’s growth of 20%. Meanwhile, the broader sector has risen 8.1% in the said time frame.
One-Year Price Performance
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Industry's Current Valuation
On the basis of forward 12-month Price-to-earnings (P/E), which is commonly used for valuing consumer staple stocks, the industry is currently trading at 32.29X compared with the S&P 500’s 19.55X and the sector’s 18.3X.
In the past five years, the industry has traded as high as 45.92X, as low as 19.64X and at the median of 29.46X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
.jpg)
4 Cosmetics Stocks to Keep a Close Eye On
Coty: This manufacturer, marketer and distributor of beauty products presently sports a Zacks Rank #1 (Strong Buy). Coty has been benefiting from its focus on six strategic pillars aimed at sustainable growth. These include stabilizing Consumer Beauty make-up brands and mass fragrances, accelerating luxury fragrances and setting the company up as a core player in prestige make-up, establishing a skincare portfolio in prestige and mass channels, strengthening e-commerce and direct-to-consumer (DTC) capabilities, growing presence in China via Prestige and certain Consumer Beauty brands as well as setting COTY as an industry leader in sustainability. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Coty’s fiscal 2023 EPS has risen by a penny to 53 cents in the past 30 days. Shares of COTY have surged 76.7% in the past year. Coty has an expected EPS growth rate of 15.6% for three to five years.
Price and Consensus: COTY
e.l.f. Beauty: This provider of cosmetic and skincare products has been undertaking significant investments in its digital business, which is yielding well. ELF appears well-placed to benefit from its commitment to solidifying its brand portfolio through innovation. A focus on effective marketing strategies helps this Zacks Rank #3 (Hold) company reach new audiences and penetrate new platforms.
The Zacks Consensus Estimate for e.l.f. Beauty’s fiscal 2024 EPS has moved up 12.4% in the past 60 days to $4.81. The company’s stock has more than doubled in the past year. e.l.f. Beauty has an expected EPS growth rate of 12.8% for three to five years.
Price and Consensus: ELF
Inter Parfums: This Zacks Rank #3 company has been benefiting from growth across European and U.S. operations due to impressive brand performance. IPAR’s focus on innovation and product launches is a key driver. The company, which manufactures, distributes and markets a wide range of fragrances and related products, has been on track to expand its business through new licenses or acquisitions.
The Zacks Consensus Estimate for Inter Parfums’ 2023 EPS has moved up 6.3% to $4.25 per share over the past 60 days. Shares of Inter Parfums have surged a whopping 107.7% in the past year. IPAR has an expected EPS growth rate of 15% for three to five years.
Price and Consensus: IPAR
Helen of Troy: This provider of consumer products across the Beauty, Housewares and Health & Home segments has been gaining from its focus on strengthening the portfolio of its Leadership Brands. Helen of Troy is making major investments in key areas to continue driving growth. To this end, the company is investing in consumer-centric innovation, digital marketing and media, new packaging, enhanced production and distribution capacity and DTC channels, among others. This Zacks Rank #3 company’s focus on developing a global restructuring plan, Project Pegasus, looks promising.
The Zacks Consensus Estimate for Helen of Troy’s fiscal 2023 EPS has remained unchanged in the past 30 days at $8.75. Shares of HELE have declined 36% over the past year. The company has an expected EPS growth rate of 8% for three to five years.
Price and Consensus: HELE
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