Revlon Inc (REV), Estee Lauder Companies Inc (EL), Avon Products, Inc. (AVP): Getting Revved Up for Makeup

One of the keys for Estee Lauder Companies Inc (NYSE:EL)’s skincare portfolio is the aging baby boomer population, which should promote high demand for anti-aging products. In the meantime, Estee is turning to emerging markets. Like Avon Products, Inc. (NYSE:AVP), Brazil is Estee’s fastest-growing market. The beauty about the emerging markets is that they have one of the fastest-growing middle class populations, which are big purchasers of cosmetics.

Bottom line

Estee Lauder Companies Inc (NYSE:EL) and Revlon Inc (NYSE:REV) trade relatively in line on a P/E basis, with Avon Products, Inc. (NYSE:AVP) having an incalculable trailing P/E due to negative earnings.

We could just leave it there and say that Estee and Revlon are comparable picks for investing in the cosmetic industry. However, if we dig a bit deeper, we find that Avon might in fact be the best investment.

On a forward P/E basis, Avon trades at only 16.4 times. Taking into account analysts’ five-year EPS growth expectations, we find that Revlon’s PEG ratio is close to 3 and Estee’s 2. With anything around a 1 or below is considered a solid growth at a reasonable price opportunity, Avon’s PEG ratio is 0.9.

All in all, the recent top-line and bottom-line troubles for Avon might be presenting investors with a buying opportunity. The company should see a solid turnaround as its 2012 revenue growth and working-capital improvement initiatives start taking hold.

The article Getting Revved Up for Makeup originally appeared on Fool.com and is written by Marshall Hargrave.

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.