Interested in investing in L'Oréal stock? Here’s what you need to know to help you make the right decision.
The cosmetics industry is well represented on the Paris Stock Exchange. It is led by L'Oréal, the world leader in beauty products, whose shares account for 6.17% of the CAC 40.
In 2020, the French company achieved a turnover of 27.99 billion euros. Its annual profitability was then 18.6%. In the same year, its net profit per share was €7.30. Its dividend increased by +3.9%, or €4.
In view of this financial data, investing in L'Oréal shares seems worthwhile. In addition, the global cosmetics market has been growing steadily for the last ten years. But before making any investment decisions, it is worth taking a look at some important information about the group.
L'Oréal has 36 brands and 88,000 employees. Present in 150 countries, the company is the world's leading cosmetics group. Its history dates back to 1909, the year in which Eugène Schueller, a chemist by training, created the Société française de teintures inoffensives pour cheveux.
After launching his first light brown hair dye in 1909, Eugène Schueller launched L'Oréal d'Or in 1920 to enhance blond hair. Three years later, the first professional magazine, L'Oréal Bulletin, was launched. From then on, the founder created the business model of his future family empire: innovation and marketing for growth.
Along with its extensive and ongoing research into beauty products, the company began to acquire other enterprises. The first acquisition was the Société des Savons français (Monsavon).
On April 5, 1939, the Société française de teintures inoffensives pour cheveux (“French Company for Harmless Hair Dyes”) became a public limited company and adopted the name L'Oréal. At that time, the company had a capital of 7,000,000 French francs, divided into 70,000 shares of 100 French francs each. Converted into euros, the capital at the time was 1,067,143 euros, and the share was worth 15.24 euros.
In more than 110 years of existence, L'Oréal has become the undisputed leader of the cosmetics industry. The group has integrated many prestigious French and international brands and has four main business lines: consumer products, with L'Oréal Paris, Garnier, Stylenanda, Mixa, Essie, Dark & Lovely and Maybelline New York; L'Oréal Luxe with Lancôme, Cacharel, Armani, Biotherm, Azzaro, Helena Rubinstein and Yves Saint-Laurent; professional products, with L'Oréal Professionnel, Kérastase, Redken, Matrix and Puerology and Active Cosmetics with Vichy, CeraVe, Decléor, SkinCeuticals and La Roche-Posay.
It also has a fleet of international brands. After setting up in the major Western cities, L'Oréal also established itself in Asia, Africa and Latin America. It created branches such as African Beauty Brand, which focuses on targeted products.
L'Oréal was listed on the stock exchange on October 8, 1963. Its shares were listed for the first time at 830 francs (€126.5) and reached 1,160 francs (€176.8) on December 31 of the same year. In April 2021, the L'Oréal share was traded at € 336.55.
L'Oréal pays dividends to its shareholders. In other words, investing in L'Oréal stock allows you to benefit from capital gains and dividends.
The group is also part of what is known in the jargon as "Dividend Aristocrats". That is, it is a company that has been increasing its dividend for at least 25 years. It is also a company with a market capitalization of over $3 billion and a daily trading volume of over $5 million.
As such, L'Oréal has a good investment profile. The company has enjoyed continuous long term growth. Its stocks are less volatile, therefore a low risk investment.
L'Oréal's activities are focused on a growth sector. When the European market declines, the Asian market (especially China) and the Middle East market take over. What's more, L'Oréal has diversified its business sector by sector (diversification of products and business lines). It has also diversified geographically by expanding to 150 countries. All this means that it is not dependent on the vagaries of the market.
Being able to increase its dividends for more than 25 years means that L'Oréal has good cash management. Note that during these years, there have been several economic crises, such as the 2001-2002 stock market crash and the 2007-2009 subprime crisis.
L'Oréal has maintained its competitive advantage by being the leader in its sector for over 10 years. Its main competitors are Unilever, Este Lauder, Coty, Procter & Gamble, Shiseido.
Greater awareness about organic and eco-responsible consumption has encouraged consumers to turn to natural products. This also leads consumers to turn to fair trade products at the expense of large laboratories. In response, L'Oréal is developing organic products, such as Garnier Bio and La Provençale Bio.