Can Cosmetics Cover Our Flaws?
Tyler is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There are a few things that people are well aware of in regards to make up. 1) Most women wear it, whether they have "blemishes" or not. 2) Most men say they are attracted to "natural beauty," but freak out when they see a woman with no makeup on. 3) Married men hate how expensive these little containers are. These, however, are not what we are here to discuss. What we are here to discuss is whether publicly traded cosmetic companies can cover our investment flaws.
Avon's (NYSE: AVP) vision is to be "the company that best understands and satisfies the product, service and self-fulfillment needs of women—globally." The company was founded by David H. McConnell, a traveling book salesman in 1886, when he discovered that women were more interested in his free samples of perfume than his actual books. Avon has a 5.6% FCF yield and has increased revenues nine out of the past ten years. Despite its stock increasing nearly 20% since mid-November, shareholders have still experienced a 4.3% decline from a year ago. As the world's largest direct seller of cosmetic supplies, Avon boasts 6.5 million independent sales representatives in over 100 countries.
Estee Lauder (NYSE: EL) was founded in 1946 with four cosmetic products and unlimited dreams. They have grown into a network of 38,500 full time employees worldwide, 12,200 of which are in the United States and Canada. The company experienced a 2-for-1 stock split on January 20. As with Avon, Estee Lauder has increased revenues for a decade - with 2009 being the exception. The stock is fairly expensive as shown by its 2.5% FCF yield. Capital expenditures have increased for three years, including over 20% last year. Shareholders have experienced a 5.2% increase in the past year. Estee Lauder strives to "bring the best to everyone we touch".
Citing slowing fragrance sales, Elizabeth Arden (NASDAQ: RDEN) cut its 2013 profit forecasts which sent its stock spiraling downward. The stock has fallen approximately 20% since the announcement. The company did however announce a 9% increase in net sales for a total of $468 million last quarter. All of this has been acquired from a $6,000 loan to open her first salon in 1909. Like these other two companies, Arden's revenues have increased steadily, however the company only shows a .4% FCF yield. It may not be the type of investment that a bargain investor would want to use to cover flaws.
Revlon (NYSE: REV) is the last major cosmetic company we will discuss. Revlon was founded in 1932, and has a vision of "providing glamour, excitement and innovation through quality products at affordable prices." The company is established in over 100 countries and six continents. Although its stock has remained basically flat over the past year, its FCF yield is 8.1%, the highest of all. Revlon's revenues have been fairly stable, increasing some years and decreasing others. However, there is not much fluctuation as it’s only grown approximately 24% in ten years. Notice in the chart below how all of these companies have basically remained level
The Foolish Conclusion...
So, can these cosmetic companies cover flaws? Yes, but probably more for their cosmetic products than their investment opportunities. All of these companies have issues. Bargain investors might enjoy Revlon, however it hasn't shown very steady growth in revenues in the long term. Elizabeth Arden performed well for most of the year until recent reports killed all momentum. Avon and Estee Lauder also have their issues, although they seem to be on the rise. Overall, I wouldn't bank on any of these companies to do much besides cover the occasional wrinkle that may appear on a woman's face.
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