Date of Completion
Dr. David Offenberg
The current valuation of the beauty industry is approximately $532 billion, yet this industry is not commonly suggested by investment professionals as a way to add diversification into their investors’ portfolios. The current craze of the market is technology and fossil fuels, but the beauty industry has remained a major player in consumer spending patterns throughout time. Through examining the historical financial statements of the publicly-traded cosmetic conglomerate Estēe Lauder, as well as several of its competitors, I modeled the future valuation of Estēe Lauder using the Discounted Free Cash Flow and Comparable Firm Multiples models. This analysis demonstrated how large changes in the overall market impacted their value and key financial metrics, as well as their historical growth trends and potential for future expansion. I also explored where the beauty industry stands today and the kinds of changes that could disrupt the industry in the future. In order to explore these questions and create my models, I used financial databases such as Mergent Online and the SEC’s EDGAR, different modeling techniques, expert articles, personal reflection, and financial statement analysis methods to ultimately develop a working Excel model and written thesis report. My work encapsulates the constant presence of the beauty industry within consumer spending habits, as it is only slightly impacted by changes in the larger market relative to many other industries considered to be “non-essentials.” It also highlights the way in which investors ought to consider exploring the beauty and cosmetic industry as a way to diversify their portfolios to create lower unsystematic risk. The focus of this report could allow for greater exploration by investors into untraditional industries and companies, particularly within beauty, and encourage further education on how social media trends could impact industries beyond beauty.
Odencrantz, Aisea and Offenberg, David, "Beyond a Tube of Red Lipstick: An Economic Valuation of Estee Lauder and the Beauty Industry" (2020). Honors Thesis. 410.