Estée Lauder stock is currently believed to be a better pick over L’Oréal stock due to its attractive valuation. LRLCY stock trades at a higher valuation multiple than EL stock, which can partly be attributed to L’Oréal’s superior revenue growth and profitability. In the last three years, LRLCY stock has outperformed EL stock, with gains of 25% compared to EL’s sharp decline of 55%. However, the changes in these stocks have not been consistent, with both underperforming the S&P 500 in certain years.
L’Oréal has seen better revenue growth compared to Estée Lauder, with an average annual rate of 9.6% from 2020 to 2023. This growth has been driven by increased sales in fragrances and skin care products. Estée Lauder, on the other hand, has seen its revenue grow at an average rate of 4.4% over the same period, with its growth being led by travel recovery and the opening up of economies post-pandemic.
When it comes to profitability, L’Oréal is more profitable with a higher EBITDA margin compared to Estée Lauder. However, Estée Lauder has been able to expand its EBITDA margin over the same period. Looking at financial risk, Estée Lauder has a higher debt as a percentage of equity compared to L’Oréal, but it also has a higher cash cushion.
Overall, it is believed that Estée Lauder is the better choice of the two companies. Estée Lauder’s valuation is estimated to be $155 per share, reflecting around 35% upside from its current levels. In comparison, L’Oréal’s valuation is estimated to be $100, close to its current market price. It is expected that EL will offer better returns than LRLCY in the next three years, driven by a rebound in Asia travel and travel retail, along with the company’s Profit Recovery Plan to boost margins.
While EL may outperform LRLCY in the next three years, it is important to consider how Estée Lauder’s peers fare on important metrics. Overall, EL is expected to perform well in the coming years, with potential for robust growth and higher stock prices.
