Top Cosmetics Stocks to Watch in Q2 2023: Prices and Growth Insights

In the cosmetics sector for Q2 2023, Sally Beauty Holdings Inc. stands out as the best value stock, while e.l.f. Beauty Inc. leads in growth and momentum.

Leading beauty stocks this quarter include e.l.f. Beauty Inc., Yatsen Holding Ltd., and Coty Inc., each soaring over 77% in the past year, outperforming competitors across the industry.

Cosmetics companies operate within both consumer staples and discretionary sectors. Over the last year, the S&P 500 Consumer Staples Sector Index dipped by approximately 1%, whereas the S&P 500 Consumer Discretionary Sector Index rose by 5%. The Russell 1000 Index experienced a 4% increase in the same timeframe.

Below is a detailed analysis of the top cosmetics stocks based on best value, fastest growth, and strongest momentum, with data current as of May 22, 2023.

Best Value Cosmetics Stocks

These stocks have the lowest trailing 12-month price-to-earnings (P/E) ratios, indicating investors pay less per dollar of profit, factoring in dividends and buybacks.

• Sally Beauty Holdings Inc.: A holding company distributing beauty products through Sally Beauty stores and professional channels. Despite a 13% share drop on May 4 due to anticipated store closures impacting sales, Sally Beauty remains a top value pick.
• Olaplex Holdings Inc.: Specializing in premium hair care, Olaplex sells to salons and consumers. The company projects double-digit declines in sales and net income for 2023, leading to a stock value drop exceeding 50% since February.
• Ulta Beauty Inc.: Operating a nationwide chain offering cosmetics, skincare, hair care, fragrances, and salon services. Ulta reported nearly 20% net sales growth in Q4 2022, fueled by new brands and price increases.

Fastest-Growing Cosmetics Stocks

Ranked by a balanced growth model combining year-over-year quarterly revenue and earnings-per-share (EPS) growth, excluding extreme outliers with over 1000% growth.

• e.l.f. Beauty Inc.: Known for affordable cosmetics focused on eyes, lips, and face, e.l.f. tripled its EPS in Q3 fiscal 2023 due to strong retail and e-commerce performance.
• Coty Inc.: Offering fragrances, color cosmetics, and skin/body care in 130+ countries. Coty’s revenue increased 9% last quarter, driven by its luxury Prestige line, and EPS doubled thanks to operational efficiencies.
• Ulta Beauty Inc.: Refer to the description above.

Cosmetics Stocks With the Most Momentum

These stocks delivered the highest total returns over the past 12 months.

• e.l.f. Beauty Inc.: See above for company details.
• Yatsen Holding Ltd.: A Chinese cosmetics and skincare holding company. After an IPO at $18.40 in November 2020 and a low of $0.39 in May 2022, Yatsen’s stock has since doubled but remains below previous highs.
• Coty Inc.: See above for company details.

Risks of Investing in Cosmetics Stocks

Cosmetics firms face pressure to continuously innovate and predict trends, as consumers expect fresh and improved products. Product development and marketing are costly, requiring companies to take significant risks to stay competitive.

Additional risks include challenges in sourcing raw materials and potential liabilities related to environmental impact or adverse health effects from products. These factors can influence earnings, revenue, and stock performance.

Advantages of Cosmetics Stocks

Cosmetics companies benefit from serving both everyday and luxury markets, allowing product diversification to withstand economic cycles. During downturns, lower-priced products may see stable demand, while luxury segments often thrive in economic booms.

The global cosmetics market was valued at over $262 billion in 2022 and is projected to grow at a 4.2% CAGR through 2030, fueled by increased skincare usage and an aging population worldwide.

Note: The information provided is for educational purposes only. The author does not hold positions in the mentioned stocks as of the article date.

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