Coty (COTY) and Estée Lauder (EL) are trading at higher valuations relative to the S&P 500 Index (IVV) (SPY) (VOO) and the Dow Jones Industrial Average (DIA). Coty is trading at a forward PE (price-to-earnings) multiple of 30.3x.
Estée Lauder is trading at a forward PE multiple of 28.5x. In comparison, the S&P 500 Index and the Dow Jones Industrial Average are trading at forward PE multiples of 17.8x and 16.7x, respectively. All valuations are as of April 25, 2016.
Valuations of peers
Strong innovation pipeline
Despite Coty’s falling revenue growth of 3.9% in fiscal 2Q16, the company aims to clean up its past portfolio practices while strengthening its innovation pipeline and improving its innovation capabilities. Also, the company recently acquired Beamly, a digital marketing company that will help Coty to accelerate growth as well as sales execution and e-commerce.
Coty’s acquisition of Hypermarcas will help to increase its exposure to higher growth in emerging markets. It will also provide a strong platform for the current Coty business and the future P&G Specialty Beauty Business in Brazil. Hypermarcas is a highly profitable business, with operating margins above Coty’s levels.
Also, the Tiffany fragrance license will further strengthen Coty’s prestigious fragrance portfolio. These acquisitions will help Coty not only to be a leader in cosmetics but also to expand its business.
To learn more about Coty’s business, please read Coty Inc.: An Investor’s Guide to the Cosmetics Giant.
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