Bloomberg gives it a rough 11x EBITDA estimate. This compares favorably with The Est’s EV/EBITDA of 14.98 and Elizabeth Arden, Inc. (NASDAQ:RDEN)’s 10.92.
Elizabeth Arden, Inc. (NASDAQ:RDEN), the cosmetic and fragrance company, has risen 34% over the last year and The Est, better known as Estee Lauder Companies Inc (NYSE:EL), is up 27.80% after hitting an all-time high of $72.70 on May 28. The Est offers a 1.00% yield.
Analysts expect 13.95% five year EPS growth (year-over-year) and give a median price target of $77.00. The company has a number of popular makeup brands under its umbrella: Smashbox, MAC, Bobbi Brown, and Clinique and its own cosmetics and fragrances as well as licensing high-end fragrances for Coach, Tory Burch, Michael Kors, and Tom Ford.
Estee Lauder Companies Inc (NYSE:EL)’s advantage over Elizabeth Arden, Inc. (NASDAQ:RDEN) is that it keeps its brand fresh with acquisitions and keeps it cachet by selling in Tier One department stores. Members of the founding Lauder family and a Lauder trust hold close to 4 million shares.
The company reported third quarter results on May 1 beating expectations with diluted net EPS up 38% over the year ago period and a 180 basis point expansion of its operating margin. It also guided higher with CEO Fabrizio Freda prediction of accelerating top-line growth for the fourth quarter. He also mentioned their Strategic Modernization Initiative should be fully implemented by the end of this year and SMI related customer supply delays in the last two quarters will not be an issue.
Elizabeth Arden, Inc. (NASDAQ:RDEN), although a better performer as a stock, is not as a company. It reported third quarter earnings of a $0.04 loss in earnings per share on May 2 compared to a profit of $0.07 in the year ago quarter. It did beat analyst expectations on the top line.
Its brands aren’t quite as high end as The Est’s and are more appealing to a youth demographic with celebrity fragrances for Justin Bieber, Nicki Minaj, and Taylor Swift. They also carry designer names like Ed Hardy, True Religion, Juicy Couture. and Kate Spade. The youth fragrances had a 22% gain in sales for the quarter.
One company that benefits from the success of all three beauty companies is retailer Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA). While the stock was a momentum fave in 2011-12, it’s only up 2.57% over the last year. Its EV/EBITDA is 15.06. It also has the highest short interest of these at 8.30%, despite its more than 10% decline from the 52 week high of $103.52 last September.
The company has no debt and operates 550 stores (with full service beauty salons) in 45 states and also offer products through catalogs and a website. Ulta has the prettiest growth with 22.67% five year EPS growth. Analysts like the name with the majority at Outperform and a $113.63 price target.
The company opened 101 new stores in fiscal year 2012 and plans over double its current count to 1,200. Despite these ambitious expansion plans the company has no debt.
Ulta’s advantage over its many competitors, drugstores, department stores, and beauty salons is its convenient locations in open shopping centers like the one closest to me anchored by a Kohl’s, Wal-Mart and Best Buy. The stores have over 20,000 SKUs for women’s and men’s beauty and grooming from Tier One department store designer fragrances to CVS beauty staples.
Its loyalty members number over 10 million. The stores have frequent promotions that draw traffic like free beauty treatments and makeovers.
Tanned, rested, and ready
Coty is tanned, rested, and ready for its closeup. The most brilliant debutante of the season should also be good long term. Both The Est and Elizabeth Arden, Inc. (NASDAQ:RDEN) have really run. The most upside should be from Coty and Ulta if you can get them at a beautiful price.
The article Will This IPO Be the Fairest of All? originally appeared on Fool.com.
AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends Ulta Salon, Cosmetics & Fragrance. The Motley Fool owns shares of Ulta Salon, Cosmetics & Fragrance. AnnaLisa is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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