NEW YORK (TheStreet) - With Avon Products (AVP) under the microscope with the SEC and FBI, we decided to check TheStreet Ratings to see if there are any good investments in the cosmetics, or personal products industry. As it turns out, there are companies in this sector to buy.
The cosmetics sector is part of the personal care services category, which enjoys a robust long term growth rate of 6%.
So, what are the best companies investors should be buying? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which person product companies made the list. And when you're done be sure to read about which soft drinks companies to buy now. Year-to-date returns are based on May 15, 2015 closing prices. The highest-rated stock appears last -- read more to see which one is No. 1.
IPAR data by YCharts
3. Inter Parfums, Inc. (IPAR)
Market Cap: $1.08 billion
Year-to-date return: 25.6%
Inter Parfums, Inc., together with its subsidiaries, manufactures, markets, and distributes a range of fragrances and fragrance related products worldwide. It offers its prestige products under the Balmain, Boucheron, Jimmy Choo, Karl Lagerfeld, Lanvin, Montblanc, Paul Smith, S.T.
"We rate INTER PARFUMS INC (IPAR) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins, growth in earnings per share and increase in net income. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- IPAR's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.35, which clearly demonstrates the ability to cover short-term cash needs.
- Net operating cash flow has significantly increased by 95.19% to -$1.31 million when compared to the same quarter last year. In addition, INTER PARFUMS INC has also vastly surpassed the industry average cash flow growth rate of 18.71%.
- The gross profit margin for INTER PARFUMS INC is rather high; currently it is at 63.93%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 9.15% trails the industry average.
- INTER PARFUMS INC has improved earnings per share by 10.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, INTER PARFUMS INC reported lower earnings of $0.96 versus $1.27 in the prior year. This year, the market expects an improvement in earnings ($1.00 versus $0.96).
- IPAR, with its decline in revenue, underperformed when compared the industry average of 4.4%. Since the same quarter one year prior, revenues fell by 10.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: IPAR Ratings Report