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4 global stocks poised to benefit from the exquisite growth of the luxury sector

  • The sector has a promising outlook and forecasts revenues of 580 billion by 2027.
  • Meanwhile, Puig, a luxury brand, is preparing to make its stock market debut.
  • Besides the IPO, we will also look at 3 other investment opportunities in the market.
  • Want to invest by taking advantage of opportunities in the luxury sector? Don’t hesitate to try InvestingPro. Sign up HERE AND NOW for less than $10 per month and get almost 40% off for a limited time on your 1-year plan!
  • The global beauty market is experiencing significant growth, with sales expected to reach $580 billion by 2027. This explosive growth reflects consumers’ unwavering interest in beauty products and the industry’s remarkable ability to adapt to changing customer preferences and tastes.

    Given this promising outlook, let’s take a look at the recent IPO of Puig Brands (BME:), a major player in the industry, and explore other intriguing investment opportunities in the beauty market.

    As always, we will leverage InvestingPro’s powerful tools to gather the most relevant data and insights to guide our analysis.

    1. Coty

    Coty (NYSE:) is an American beauty products manufacturer based in New York. The company was originally founded in Paris, France in 1904. It is known for using film, entertainment, or sports professionals to name its products.

    Coty Price Chart

    On May 6, it reported , beating market expectations for revenue, but failing to meet EPS expectations.

    Past earnings

    Source: InvestPro

    Here are the winning highlights:

    • Income: $1.39 billion versus $1.37 billion estimated by analysts (small beat)
    • EPS (non-GAAP): $0.05 versus analyst expectations of $0.06 (17% miss)
    • Full year EPS forecast (non-GAAP): maintained from previous, $0.46 at midpoint, roughly in line with analyst expectations (although expected increase in adjusted EBITDA margin is higher than previously expected)
    • Gross margin (GAAP): 64.8%, compared to 62.9% in the same quarter last year
    • Free movement of capital was -$234.3 million, down from $363 million in the previous quarter
    • Market capitalization: $10.38 billion

    Chloé, Calvin Klein, Burberry (OTC:) and Hugo Boss (OTC:) (ETR:) perfumes represented 62% of its turnover over the last financial year.

    Its key markets are Europe, the Middle East and Africa, which represent 50% of its activity, followed by the Americas. By 2027, its revenue is expected to reach $7.5 billion.

    Its fair value would be $12.54.
    Just value

    Source: InvestPro

    2. LVMH

    A multinational luxury goods conglomerate based in Paris, France, LVMH (OTC:) (EPA:) was founded in 1987 through the merger of Louis Vuitton and Moët Hennessy.

    It went public in 1989 and has since become the largest luxury goods company in the world.

    LVMH Price Chart

    Its dividend yield is 1.66%.

    LVMH dividends

    Source: InvestPro

    On July 23, it presents its quarterly results. By 2024, EPS is expected to increase by 6% and revenue by 4%.

    LVMH revenue and EPS

    Source: InvestPro

    The market consensus sees potential at €879.23.

    LVMH objectives

    Source: InvestPro

    3. Kering

    Kering (OTC:) (EPA:) is a French luxury brand business group.

    It was previously called PPP (Pinault-Printemps-Redoute). On March 22, 2013, Pinault announced that the group would change its name to Kering, which shareholders approved on June 18, 2013.

    Kering Price Chart

    Its dividend yield is 5.63%.

    Kering dividend data

    Source: InvestPro

    It will publish its accounts on July 24. The outlook for the following quarters is favorable with an increase in EPS.

    Kering revenue and EPS forecast

    Source: InvestPro

    The market gives it potential at €377.08.

    Kering targets

    Source: InvestPro

    4. Puig

    It is a perfumery founded in 1914 in Barcelona that covers cosmetics, fashion and skin care. In 2023, it achieved a turnover of 4.304 million euros.

    It debuted on the Spanish stock exchange last week at a price of 24.5 euros, giving it a market capitalization of 13.92 billion euros, making it Europe’s largest IPO in 2024.

    Its debut could serve as a “barometer” for other companies ready to go public, such as Europastry, Tendam and Hotelbeds.

    In its early days, only institutional investors could buy shares, but now retail investors can as well.

    The company aims to distribute 40% of its net profit as dividends to its shareholders.

    Certainly, the exit price is at the high end of the range, reflecting the company’s positive outlook for its future. However, the exit price represents a 15% discount compared to the industry average in terms of enterprise value.

    The market estimates that a “reasonable discount” could be 20% compared to France’s L’Oréal or a 3% premium to the sector, which would mean it would be attractive as long as it remains below 31 euros.

    In his favour :

    • For this year, the company plans to continue its expansion, particularly in the Asian market.
    • In 2023, it achieved a turnover of 4,304 million euros, achieved an ebitda of 849 million euros (+33%) and recorded a net profit of 465 million euros (+16%).
    • The Puig family’s maintenance of a majority stake and voting rights guarantees continuity of management, generating long-term investor confidence.
    • Its solid position in the market.
    • Its strategic acquisitions.
    • Its pricing strategy.

    It is still too early to analyze its market prospects, but we will follow it closely.

    ***

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    Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice or recommendation to invest as such and is not intended to encourage the purchase of any assets in any manner. I would like to remind you that any type of asset is evaluated from several points of view and is very risky and therefore any investment decision and the associated risk remains the responsibility of the investor.

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