Growth In Beauty: 3 Rallying Stocks With High ROE

Growth In Beauty: 3 Rallying Stocks With High ROE

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The beauty industry received profit-heavy reports from two major companies last week. Revlon (REV) shared its second quarter earnings this past Wednesday, and the beauty giant reported $24.7 million in net income, reflecting a 222.5% year-over-year increase from Q2 2012. Wednesday also saw the release of Shiseido’s (OTCMKTS:SSDOY) first quarter fiscal year 2014 earnings in which the Japanese cosmetics titan posted a net income of 2.66 billion yen, or $27.63 million, which is 3.3 billion yen greater than the company’s first quarter fiscal year 2013 net income.

As of July 12, Investor’s Business Daily’s Cosmetics and Personal Care industry group has posted a 32% gain this year, which the publication notes is “one of the 30 best gains among the 197 industries tracked by IBD.” The industry group’s performance is unsurprising given the rate of growth that the beauty and personal care industry is currently experiencing. According to Investor’s Business Daily, citing a market report from Euromonitor International, the beauty and personal care industry had $68.7 billion in domestic sales and $433.4 billion in global sales last year. Euromonitor International expects annual sales in the U.S. to expand by 3-4% over the next five years to $81.7 billion in 2017. Meanwhile, annual global sales are projected to increase by roughly 5% within the same period, totaling $562.9 billion by 2017.

Investing ideas

Given the performance of the beauty industry thus far in 2013, we decided to scan the industry for stocks that are well positioned to deliver solid returns through the rest of this year.

We began with a universe comprised of personal products companies, which we subsequently narrowed down to a list of firms that offer beauty products. Next, we screened for stocks that are rallying above their 20-day, 50-day, and 200-day moving averages (MA). This indicates that these stocks have strong upward momentum.

For our last screen, we decided to toss in an additional metric to help us isolate the stocks with encouraging signs of profitability. We screened the remaining group of stocks for those with a healthy Return on Equity (ROE) greater than the industry average. ROE measures a firm's profitability by expressing a company's profits as a percentage of shareholder equity.

Click on the image below to see sales data over time. Quarterly sales data sourced from Zacks Investment Research.

Do you think there's more upside potential in store for these beauty stocks? Use this list as a starting point for your own analysis.

1. United-Guardian Inc. (UG, Earnings, Analysts, Financials): Develops, manufactures, and markets cosmetic ingredients, personal and health care products, pharmaceuticals, and specialty industrial products in the United States, Canada, China, France, and internationally.

Market cap at $127.54M, most recent closing price at $27.74.

The stock is currently rallying 5.35% above its 20-day MA, 8.24% above its 50-day MA, and 30.66% above its 200-day MA.

Return on Equity is 36.0% vs. 28.75%.
 

2. Nu Skin Enterprises (NU, Earnings, Analysts, Financials): Develops and distributes anti-aging personal care products and nutritional supplements worldwide.

Market cap at $5.16B, most recent closing price at $87.35.

The stock is currently rallying 8.08% above its 20-day MA, 27.42% above its 50-day MA, and 71.79% above its 200-day MA.

Return on Equity is 39.50% vs. 28.75%.
 

3. Estee Lauder Companies (EL, Earnings, Analysts, Financials): Engages in the manufacture, marketing, and sale of skin care, makeup, fragrance, and hair care products worldwide.

Market cap at $26.05B, most recent closing price at $67.43.

The stock is currently rallying 1.32% above its 20-day MA, 0.39% above its 50-day MA, and 4.97% above its 200-day MA.

Return on Equity is 32.40% vs. 28.75%.

 

 

(List compiled by Mary-Lynn Cesar. All data sourced from Finviz.)

 

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6 Responses to “Growth In Beauty: 3 Rallying Stocks With High ROE”

  1. I bookmarked this blog a while ago because of the useful content and I am never being disappointed on Beauty Industry. This was a useful post and I think it is rather easy to see from the other comments as well that this post is well written and useful. Keep up the good work.

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  3. jason says:

    Thanks for this article really great to know what this is industry is producing in sales mind blowing figures.

  4. Clementine says:

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  5. Mark says:

    Euromonitor International expects annual sales in the U.S. to expand by 3-4% over the next five years to $81.7 billion in 2017. Meanwhile, annual global sales are projected to increase by roughly 5% within the same period, totaling $562.9 billion by 2017. http://no2extremesurgereview.com

  6. Given the performance of the beauty industry thus far in 2013, we decided to scan the industry for stocks that are well positioned to deliver solid returns through the rest of this year.

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