Top Cosmetics Stocks for Q2 2023

SPH is top for value, while ELF leads for growth and momentum

David Dee Delgado / Getty Images

Top cosmetics stocks this quarter include e.l.f. Beauty Inc., Yatsen Holding Ltd., and Coty Inc., all of which have climbed at least 77% in the last year to outpace rivals across the industry.

Cosmetics companies can be found in both the consumer staples and consumer discretionary sectors. In the last year, the S&P 500 Consumer Staples Sector Index has fallen by about 1%, while the S&P 500 Consumer Discretionary Sector Index has risen 5%. The Russell 1000 Index has climbed roughly 4% in the same period.

Below, we look at the top cosmetics stocks based on best value, fastest growth, and most momentum. All data below are as of May 22.

These are the cosmetics stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Source: YCharts

These are the top cosmetics stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth.

Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 1,000% were excluded as outliers.

Source: YCharts

These are the cosmetic stocks that had the highest total return over the past 12 months out of the companies we looked at.

Source: YCharts

Many cosmetics consumers expect manufacturers to offer a robust and constantly-improving line of products. This places significant pressure on cosmetics companies to continue to innovate and to accurately assess and predict trends. Because creating and marketing new products is expensive, companies often must take big risks in an effort to keep up with the competition.

The creation and production of cosmetics products also expose companies to a myriad of risks. Sourcing raw materials can be difficult, for example. And cosmetics companies can be found liable for environmental damage caused by manufacturing or adverse health effects of products. Consumers may not think of these risks, but they can impact the earnings, revenue, and stock performance of a cosmetics company.

Cosmetics companies have the benefit of occupying both everyday and luxury consumer product spaces. This can enable them to diversify their product offerings to weather economic cycles. As the economy weakens, consumers tend to reduce purchases of luxury goods, perhaps giving an edge to cosmetics companies focusing on a lower price point. The opposite may be true in an economic boom.

Another advantage of the cosmetics industry is its rapid growth. The global cosmetics market was valued at over $262 billion in 2022 and is predicted to expand at a compound annual growth rate (CAGR) of 4.2% through 2030. Growth may be driven by an increase in the use of skincare and personal care products and by demand from an aging global population.

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As of the date this article was written, the author does not own any of the above stocks.

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