Fragrance products

Which household and personal product stock is a better buy?

With the outbreak of COVID-19, growing concerns over health and hygiene have led to an increase in demand for household and personal care products. The rapid digitization of operations, online sales and entry into new markets have enabled these companies to make substantial profits. The growing demand has prompted these companies to launch quality and environmentally friendly products. The global household care market is expected to grow at a pace 1.5% CAGR to reach $127.63 billion by 2026.

In addition, growing user interest in natural, organic and chemical-free skin care, makeup, hair care and fragrances and emerging beauty trends have boosted the growth of the personal care segment. The global personal care market is expected to grow at a pace 10.6% CAGR to reach $322.69 billion by 2025. Despite rising inflation, the inelastic demand for these products should help household and personal care products stay afloat.

Coty Inc. (COTY) and Helen of Troy Limited (HELLO) are leading companies providing household and personal products worldwide. COTY manufactures and sells branded beauty products, including prestige fragrances, skin and body care, and color cosmetics. It also sells hair and nail care products for professionals. HELE designs, develops, imports, markets and distributes consumer products falling under household items; Health & Home; and Beauty Segments. Both companies mainly sell their products through department stores, pharmacies and online retailers.

While HELE has lost 8.7% over the past year, COTY has jumped 32.7%. Which of these stocks is a better choice now?

Latest developments

On February 8, 2022, COTY’s Sally Hansen brand unveiled a first advanced virtual try-on tool in the AgileHand technology market from leading beauty and fashion technology solutions provider Perfect Corp., allowing consumers to easily experience hundreds of Sally Hansen nail color options in an augmented reality environment. This creates a whole new shopping experience, whether online or in person, making nail polish testing accessible and hygienic. Businesses should continue to see solid consumer demand in the coming months.

On December 30, 2021, HELE completed the acquisition of Osprey Packs, Inc, a manufacturer of custom-designed backpacks, for $414.70 million in cash, marking its ninth leading brand. The acquisition of Osprey will significantly complement HELE’s indoor and outdoor housewares portfolio alongside the Hydro Flask and OXO brands and further accelerate its international growth strategy.

Recent financial results

For its second quarter of fiscal 2022 ended December 31, 2021, COTY’s net revenue increased 11.5% year-over-year to $1.58 billion. The company’s adjusted gross profit was $1.02 billion, up 22.6% from the prior year period. Its adjusted operating profit was $236.30 million, an increase of 16.4% over the same period last year. COTY’s adjusted net income was $147.70 million, indicating a 44.4% year-over-year improvement. Its adjusted EPS rose 30.8% year-over-year to $0.17. The company had $523.40 million in cash and cash equivalents as of December 31, 2021.

HELE’s sales for its fourth quarter of fiscal 2021 ended December 31, 2021 increased 2% year-over-year to $624.88 million. The company’s adjusted gross profit was $274.14 million, down 4.6% year-over-year. Its adjusted operating profit was $106.12 million, indicating a 5.2% decline from the prior year period. HELE’s adjusted net income was $90.65 million for the quarter, down 4.4% from the same period last year. Its adjusted EPS fell 1.1% year-over-year to $3.72. As of December 31, 2021, the company had $2.59 billion in cash and cash equivalents.

Past and expected financial performance

COTY’s total assets and EBITDA have declined at CAGRs of 14.2% and 12.9%, respectively, over the past three years.

Analysts expect COTY’s EPS to grow 2,600% year-over-year in fiscal 2022, ending June 30, 2022, and 40.7% in fiscal 2022. fiscal 2023. Its revenue is expected to grow 14.1% year over year in fiscal 2022 and 6.3% in fiscal 2022.

By comparison, HELE’s total assets and EBITDA have grown at CAGRs of 13% and 7.4%, respectively, over the past three years.

HELE’s EPS is expected to increase 0.2% year-on-year in fiscal 2022, ending December 31, 2022, and 9.3% in fiscal 2023. Its revenue is expected to increase 0.7% year-over-year in fiscal 2022 and 9.4% in fiscal 2022. fiscal 2023.

Evaluation

In non-GAAP futures PEG terms, HELE is currently trading at 1.59x, 61% higher than COTY’s 0.62x. In terms of EV/Forward Sales, COTY’s 2.48x compares to HELE’s 2.57x.

Profitability

COTY’s revenue over the past 12 months is almost 2.3 times that of HELE. COTY is also more profitable, with 63% Gross margin against 43.5% for HELE.

Additionally, COTY’s leveraged free cash flow of 14.6% compares favorably to HELE’s negative value.

POWR Rankings

Although COTY has an overall rating of B, which translates to Buy in our own POWR Rankings system, HELE has an overall grade of C, equivalent to a neutral. POWR ratings are calculated by considering 118 separate factors, each weighted to an optimal degree.

COTY has a B rating for growth. COTY’s trailing 12-month EBITDA increased 459.1% over the past year. HELE’s C rating for growth is in line with its negative EBITDA growth over the past year.

COTY has a B rating for quality, consistent with its industry-leading profitability ratios. COTY’s 14.6% leveraged free cash flow year-over-year is 221.8% higher than the industry average of 4.6%. HELE’s C rating for quality is in line with its leveraged negative free cash flow margin.

Of the 65 A-rated shares Fashion & Luxury industry, COTY is ranked #37.

HELE is ranked #38 out of 64 stocks in the C rating Consumer goods industry.

Beyond what we’ve stated above, our POWR rating system also rated COTY and HELE for value, sentiment, momentum, and stability. Get All COTY Ratings here. As well, Click here to see additional POWR ratings for HELE.

The winner

The continued increase in demand for household and personal care products due to increased hygiene awareness should benefit both COTY and HELE. However, higher profitability and a relatively lower valuation make COTY a better buy here.

Our research shows that the odds of success increase when betting on stocks with an overall POWR rating of Buy or Strong Buy. Click here to access top-rated stocks in the fashion and luxury industry, and here for those in the consumer goods industry.


Shares of COTY were trading at $9.31 per share on Thursday afternoon, down $0.17 (-1.79%). Year-to-date, COTY is down -11.33%, compared to a -7.38% rise in the benchmark S&P 500 over the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a particular interest in researching market inefficiencies. She is passionate about educating investors, so they can succeed in the stock market. Continued…

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