Profitability, Growth, and Risk:

Beauty vs. Industrials

Shehre-Banu Furniturewalla

Industry Comparison: Beauty vs. Industrials

• The Consumer Discretionary industry (which includes beauty brands) shows higher profitability (ROA) but greater financial risk (higher liability-to-asset ratios) compared to Industrials.

• Industrials companies are more financially stable, with lower debt and more clustered profitability.

• Some beauty brands may take on more debt to fund growth, which could lead to higher returns but also increased financial risk.

• The Industrials sector is more predictable, making it a safer choice for long-term stability, while Beauty & Cosmetics offers higher potential rewards but with more financial uncertainty.

Affordable Beauty Brands: ROA & Risk

• e.l.f. Beauty has the highest Return on Assets (ROA), meaning it uses its assets more efficiently than Ulta and Estée Lauder.
• Estée Lauder shows strong Gross Margins, indicating it earns a high profit after covering the cost of goods.
• Ulta Beauty has a well-balanced profitability profile, excelling in both Operating and Net Margins.
• These differences reflect e.l.f.’s focus on cost efficiency, Estée Lauder’s premium pricing, and Ulta’s retail-driven model.

Conclusion 

Final Conclusion: Beauty & Cosmetics vs. Industrials

• The Beauty & Cosmetics industry (Consumer Discretionary) generally has higher profitability (ROA) but also higher financial risk (liability-to-asset ratio) compared to the Industrials sector.
• Industrials companies are more financially stable, while Beauty brands may take on more debt to fuel growth and maintain high margins.

Company-Level Summary: e.l.f., Ulta, Estée Lauder

• e.l.f. Beauty is the most efficient in asset usage (highest ROA), indicating strong growth potential.
• Estée Lauder has the highest Gross Margin, showing its ability to generate high revenue from premium pricing.
• Ulta Beauty has a balanced profitability profile, excelling in Net Margin and Operating Margin.
• These findings suggest that Beauty is a strong industry for career opportunities, with each company excelling in different areas.