L'OREAL

Analysis of L'Oreal share price

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L'Oréal's market cap, dividends, sales and earnings in 2020-2021

25/11/2021 - 13h17

In February 2021, the world's leading cosmetics company L'Oréal unveiled its annual results for the 2020 financial year. These were penalised by the coronavirus pandemic.

Elements that can influence the price of this asset:

Analysis N°1

First, we know that the L’Oreal share is considered a portfolio fund. Any change in this level could lead to a significant rise or fall in its price.

Analysis N°2

We also know that the share price is very reactive to the announcement effects of some groups such as the Japanese Shiseido or the American Estée Lauder. You should therefore keep an eye on this news.

Analysis N°3

We will also keep a close eye on the group's acquisitions, and in particular on major operations such as the recent purchase of the American company It Cosmetics, whose aim is to boost external growth.

Analysis N°4

The l'Oréal group also holds a stake in the capital of Sanofi. This holding is likely to change over time and will therefore have an indirect impact on the l'Oréal share price.

Analysis N°5

Finally, it should be remembered that the company's capital is still controlled by the Bettancourt and Meyers families with 33.14% of the shares and by the Nestlé group which holds 23.18% of the shares. Any transaction that changes this distribution will also have a strong impact on trends.

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General presentation of L'Oreal

The French group l'Oreal is a company specialising in cosmetics. More precisely, it is now the world's leading group in this sector. Generally speaking, the l'Oréal group develops and markets numerous products such as skin care products which represent 29.3% of the total turnover, make-up products which represent 27.9% of the turnover, hair care products which represent 17.5% of the turnover, colouring products which represent 11.8% of the turnover, perfumes and toilet waters which represent 9.2% of the turnover as well as other types of cosmetic products for the remaining 4.3% of the turnover. To get a clearer picture of these activities, we can divide these products into product families according to the share of total sales they generate, as follows:

Cosmetic products for the general public represent the major part of the group's activities with nearly 46.6% of total sales. It includes several internationally renowned brands such as L’Oreal Paris products, Garnier brand, Maybelline New York brand, NYX Professional Makeup brand, Essie Niely brand, Dark and Lovely brand, Mixa brand, MG brand and Carol's Daughter brand.

So-called luxury cosmetics are the second largest activity of the l'Oréal group with a share of 32.5% of the company's turnover. Here again, we find many popular brands such as Lancôme, Yves Saint Laurent, Giorgio Armani, Kiehl's, Urba Decay, IT Cosmetic Shu Uemura, Biotherm, Helena Rubinstein, Yue Sai, Clarisoniv, Atelier Cologne, Ralph Lauren, Viktor&Rolf, Diesel, Cacharel or Maison Margiela.

Products for professionals are also part of the products offered by L’Oreal and even represent 12.9% of the group's turnover. These include the L’Oreal Professionnel brand, the Redken brand, the Matrix brand, the Kérastase brand, the Pureology brand, the Decléor Shu Uemura Art of Hair brand, the Carita brand, the Mizani brand and the Baxter brand.

Finally, L’Oreal also offers a range of so-called "active" products which generate 8% of the company's turnover. It includes the Laroche-Posay, Vichy, CeraVe, SkinCeuticals, Roger & Gallet and Sanoflore brands.

In order to sell all these products, the l'Oréal group can count on the large-scale retail chains, distance selling sites, selective distribution and, of course, hair salons and pharmacies and parapharmacies. As far as its production is concerned, l'Oréal has more than 14 different sites throughout the world.

From a geographical point of view, the activities of the L’Oreal group can be spread throughout the world, since only 9.4% of turnover is currently generated in France. Western Europe accounts for 21.8% of sales. North America accounts for 28.3% of sales, Asia-Pacific for 23.6%, Latin America for 7.5%, Eastern Europe for 6.7% and finally Africa and the Middle East for 2.7%.

Analysis of L'Oreal share price
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The major competitors of L'Oreal

To effectively analyze the L’Oreal share price, you need to know the main data about this group, such as information about its activities and sales, but you also need to understand the economic environment in which this company operates. To do this, you must of course be interested in the company's competition. This is what we are proposing to you right now with a presentation of the four largest companies in the cosmetics sector. Indeed, L’Oreal is currently ranked first in this sector of activity, but it is facing some big names.

Unilever Group 

Unilever is undoubtedly the main competitor of L'Oreal in the world. This international company of Anglo-Dutch origin and based in Rotterdam since 2018 is present in more than 100 countries and, apart from the cosmetics segment alone, is also one of the largest companies in the world in terms of sales.

Procter & Gamble 

The group comes in third place in the global cosmetics sector in terms of turnover. It is an American company that also specializes in consumer goods, mainly hygiene and beauty products. It is currently based in Cincinnati, Ohio.

Estée Lauder

Next is Estée Lauder, which is also one of the leading companies in the United States in the production and sale of skin care products, cosmetics, perfumes or even hair care products.

Shiseido Company

Finally, the fifth largest cosmetics company in the world is the Japanese Shiseido Company, which produces consumer cosmetics and luxury products. It is the oldest company in this sector in the world since it was established in 1872.


The major partners of L'Oreal

In the cosmetics sector and in other areas of activity, L’Oreal does not only have competitors and has also created some strategic partnerships with certain companies.

Nestlé

This is the case of the Nestlé group with which the group had a partnership in the field of nutraceuticals but which finally ended in 2015 in favour of Innéov.

Diesel

 L’Oreal also partnered with clothing brand Diesel in 2006 to launch a fragrance brand.

Philips

More surprising is the association of L’Oreal with the Philips group, the latter having developed a strategy based on multiple partnerships for the wider distribution of its products.

Facebook 

In 2018, the group is stepping up its digitalization by partnering with the social network with the aim of offering augmented reality fitting experiences for a dozen of its brands.

Armani

Recently, the group also renewed its partnership with the Giorgio Armani group, with the license agreement renewed until 2050.

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The factors in favour of a rise in the L'Oreal share price:

L’Oreal's greatest strength is undoubtedly its position in the international cosmetics market. Indeed, since its creation in 1909, the French group has succeeded in becoming the leader of this market at the international level, which gives it a certain confidence from investors.

We can also highlight the organization of the group, which divides its activities into four major divisions. First, there are products for the general public, which alone generate more than 50% of the group's sales, then luxury products, which generate around 30% of sales, then products for professionals, which generate 15% of sales, and finally the active cosmetics sector, which generates around 5% of sales. This distribution of sales between the various divisions enables L’Oreal to protect itself from the risk of exposure linked to a single form of activity. The luxury sector in particular, which shows greater stability in times of economic crisis, is a real guarantee for this company.

As we have just seen, L’Oreal is the world leader in its sector of activity and this is not by chance. Indeed, the group has an excellent presence on the international market, thanks in particular to the ownership of more than 32 brands that are spread out in different regions of the world from a geographical point of view.

Among the advantages of this group for the years to come, we can also highlight the interesting growth of the beauty market at the international level for several years now.

The L’Oreal group has also always shown a strong capacity to adapt to the market and to new consumer needs.

Of course, it is also thanks to its strong capacity for innovation that the L’Oreal group manages to maintain its position as leader in its sector. Indeed, the group's investments in research and development are particularly high and the results obtained by these innovations generate no less than 15% of sales each year.

From a purely financial point of view, the L’Oreal group also benefits from a balanced operating margin between its different business units, a sign that the strategy in place is effective. It has also achieved record results in recent years.

The group's buyout policy is also commendable, with regular acquisitions of small but high potential companies. These acquisitions are then intelligently exploited and developed through investments in R&D and marketing.

Finally, the last advantage of the l'Oréal group and its shares is of course the financial structure of the company itself. The group is in excellent financial health and offers a distribution of more than 50% of its earnings. The group also frequently carries out large share buybacks.

The factors in favour of a drop in the L'Oreal share price:

Firstly, although most of the group's activities are showing interesting growth, certain divisions such as dermatology and products for professionals have shown signs of slowing down in recent years, which could weigh on the company's profitability in the longer term.

Although L’Oreal's international presence allows it to develop its offer in various markets, including emerging markets, the French market is proving more difficult with declining sales and the loss of market share could increase in the future.

As an investor or shareholder, we can also regret the absence of quantitative guidance on the group's annual objectives, which leaves little room for speculation.

Finally, the L’Oreal share remains a relatively expensive stock to buy. This overestimation has some negative effects, including significant market sanctions at the slightest slowdown in sales growth, especially at entry points.

On the whole, the flaws of the L’Oreal share and the weaknesses of this company remain relatively limited, but it is nevertheless important to take them into account during your analysis because these weaknesses can sometimes have a significant impact on the share price.

The information supplied here is only for indicative purposes and should not be used without the completion of a comprehensive and complete fundamental analysis of this asset notably taking into account exterior data, future publications and announcements and all fundamental events and news that could influence the strengths and weaknesses or make them more or less significant. This information does not in any way constitute recommendations relating to the completion of transactions.

Frequently Asked Questions

Which stock market indices does the L’Oreal share belong to?

You probably already know that the L’Oreal group is one of the 40 largest French stock market capitalisations and, as such, its stock is included in the French national stock market index CAC 40. However, this stock is also included in other indices such as : CAC All Shares, CAC All-Tradable, CAC Large 60, Euro Stoxx 50, Euronext 100, Euronext® CDP Environment France EW, Euronext® CDP Environment France Ex Oil, FTSE Eurotop 100, Low Carbon 100 Europe, PEA, Stoxx Europe 50, Stoxx France 50, Stoxx Global 200

What factors can cause the L’Oreal share price to fall?

Certain external factors and elements can cause the L’Oreal share to lose many points. For example, you should pay attention to the following threats: A slowdown in growth in large developing countries such as China and India could lead to a significant drop in group sales. Increasingly strong competition in this sector of activity is also to be monitored, as are counterfeit products, which lead to significant losses.

How to trade l'Oréal shares?

There are several ways to trade the L'Oreal share price. You can either buy the shares of this French company and add them to your stock portfolio or you can register on a trading platform that offers CFDs. These contracts for difference will allow you to speculate on the rise or fall of the share price without actually buying the shares.

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