Beauty stocks have shown remarkable resilience in a challenging market, outperforming many of their peers despite economic headwinds. Through innovation, strong brand loyalty, and targeted marketing, luxury and prestige brands in the beauty sector continue to capture market share.
Therefore, investors might consider adding three fundamentally stable beauty stocks, The Estée Lauder Companies Inc. (EL), Ulta Beauty, Inc. (ULTA), and Sally Beauty Holdings, Inc. (SBH), to their watchlists.
Emerging trends such as clean beauty, anti-aging solutions, and sustainable formulations are where beauty companies are mostly tapping in. The growing demand for sustainable, personalized, and scientifically-backed solutions drives brands to invest in advanced research and technology. This relentless focus on innovation attracts new customers and drives revenue.
Additionally, with the rise of smartphones and internet access, AI technology is emerging as a promising solution for diagnosing skin conditions. Advancements in AI technology focus on utilizing new techniques and incorporating more variables to detect fine lines, wrinkles, hydration levels, and sun damage and monitor skin conditions. The AI in the beauty and cosmetics market is set to be worth $4.4 billion in 2025. Also, the global cosmetics market is anticipated to reach $445.98 billion by 2030, growing at a CAGR of 6.1%.
Considering these conducive trends, let’s examine the fundamentals of the above-mentioned retail stocks in detail:
The Estée Lauder Companies Inc. (EL)
EL is a manufacturer, marketer, and seller of skincare, makeup, fragrance, and hair care products worldwide. It offers its products under the Estée Lauder, Clinique, Origins, M·A·C, Bobbi Brown Cosmetics, La Mer, Aveda, Jo Malone London, TOM FORD, Too Faced, Dr.Jart+, and The Ordinary brands.
On February 26, EL announced a collaboration with biotechnology company Serpin Pharma to deliver significant skincare ingredients to advance longevity benefits for consumers around the world. The collaboration will focus on how Serpin’s anti-inflammatory research will accelerate EL’s transformative product innovation. This partnership will bring novel technology and advance EL’s Transformative innovation agenda.
On January 29, EL collaborated with the Massachusetts Institute of Technology (MIT) and its laboratory, led by the renowned Dr. Robert Langer, to fuel ingredient innovation in the development of biodegradable materials for cosmetic applications and explore new solutions to combat the effects of visible light from the sun. This partnership aims further to forge EL’s leadership in green chemistry and innovation.
The stock’s trailing-12-month gross profit margin of 73.15% is 103.9% higher than the industry average of 35.87%. Similarly, its 12.49% trailing-12-month levered FCF margin is 99.8% above the industry average of 6.25%.
In the fiscal second quarter that ended on December 31, 2024, EL’s net sales amounted to $4.00 billion. Its adjusted operating income for the quarter came in at $462 million, while its adjusted earnings per share stood at $0.62.
Analysts expect EL’s revenue for the fiscal year (ending June 2025) to be $14.44 billion and its EPS to $1.38. For the fiscal year 2026, its revenue is expected to increase 2.6% year-over-year to $14.82 billion, while its EPS is forecasted to settle at $2.35, indicating a 70.7% improvement over the prior year.
Over the past three months, the stock has surged marginally, closing the last trading session at $73.28.
EL’s stance is apparent in its POWR Ratings. The stock has a B grade for Quality. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Among the 59 stocks in the B-rated Fashion & Luxury industry, it is ranked #52. Click here to see the additional EL ratings (Growth, Value, Momentum, Stability, and Sentiment).
Ulta Beauty, Inc. (ULTA)
ULTA operates as a specialty beauty retailer offering branded and private label beauty products, including cosmetics, fragrance, haircare, skincare, bath, and body products, through its Ulta Beauty stores, shop-in-shops, website, and mobile applications.
In terms of the trailing-12-month net income margin, ULTA’s 10.58% is 151.2% higher than the 4.21% industry average. Similarly, its 20.18% trailing-12-month ROTA is 425.7% higher than the industry average of 3.84%. Also, its trailing-12-month ROCE of 55.18% compares to the industry average of 11.48%.
ULTA’s net sales for the fiscal third quarter that ended on November 2, 2024, increased marginally year-over-year, amounting to $2.53 billion. Its gross profit amounted to $1.01 million, increasing 1.4% year-over-year. In addition, the company’s net income amounted to $242.18 million. Also, its net income per share came in at $5.14, representing a marginal increase from the last year.
Street expects ULTA’s EPS for the fiscal first quarter (ending April 2025) to decline marginally year-over-year to $6.22. Its revenue for the same period is expected to register a 3.2% growth from the prior year, settling at $2.81 billion. In addition, it surpassed the consensus revenue and EPS estimates in three of the trailing four quarters, which is promising.
ULTA shares have surged marginally over the past three months to close the last trading session at $366.73.
ULTA’s fundamentals are reflected in its POWR Ratings. It is ranked #29 out of 37 stocks in the B-rated Specialty Retailers industry.
Beyond what is stated above, we’ve also rated ULTA for Growth, Value, Momentum, Stability, Sentiment, and Quality. Get all ULTA’s ratings here.
Sally Beauty Holdings, Inc. (SBH)
SBH operates as an international specialty retailer and distributor of professional beauty supplies. The company operates through two segments: Sally Beauty Supply and Beauty Systems Group.
On February 6, SBH’s segment Beauty Systems Group signed a distribution agreement with K18, one of the most admired hair care brands in the professional channel. The partnership will launch on April 1, 2025, in all Beauty Systems Group stores in the United States and Canada, including the e-commerce channel. This partnership with a high-efficacy brand should boost sales and customer growth.
SBH's trailing-12-month ROCE and ROTA of 29.39% and 6.49% are 156.1% and 69.2% higher than their respective industry averages of 11.48% and 3.84%. Likewise, its trailing-12-month asset turnover ratio of 1.37x is 37% above the industry average of 1.00x.
During the fiscal first quarter that ended on December 31, 2024, SBH’s net sales increased marginally year-over-year, amounting to $937.89 million. Its gross profit amounted to $476.84 million, increasing 2.1% year-over-year.
Its operating earnings improved by 45.1% from the prior year’s value to $100.32 million. In addition, the company’s non-GAAP net earnings rose 6.9% from the year-ago value to $44.85 million, while its EPS stood at $0.43, up 10.3% year-over-year.
The consensus revenue estimate of $3.72 billion for the fiscal year 2025 (ending September 2025) remains stagnant year-over-year. The consensus EPS estimate of $1.83 for the ongoing quarter indicates an 8.1% improvement year-over-year.
The stock has declined 4.2% intraday to close the last trading session at $9.18.
SBH’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has an A grade for Value and a B for Growth and Quality. Within the same Specialty Retailers industry, it is ranked #8 out of 37 stocks. Click here to see SBH’s ratings for Momentum, Stability, and Sentiment.
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EL shares were trading at $73.32 per share on Thursday afternoon, up $0.04 (+0.05%). Year-to-date, EL has declined -2.21%, versus a 0.03% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
