Beauty Health Co. (SKIN) designs, develops, manufactures, markets, and sells aesthetic technologies and products worldwide. The company also provides a range of skin-enhancing systems. On the other hand, Nu Skin Enterprises, Inc. (NUS) develops and distributes personal care and wellness products worldwide. It also provides customized skin care systems.
People are now more wellness-conscious than ever before, developing personal health and skincare rituals to stay fit. Skincare products are gaining popularity worldwide, driven by changing lifestyles. Thanks to social media platforms, people are now more aware of the various brands and their products and trends. Several new skincare brands are recently popping up, offering natural and organic products to soothe the demand for chemical-free alternatives. The global skincare market is projected to reach $145.82 billion in 2028, growing at a CAGR of 5.52% in 2021-2028. Both SKIN and NUS are well-positioned to benefit from the growing market.
SKIN has gained 44.1% over the past three months, while NUS has slumped 27.8%. Also, NUS’ 18.6% slump year-to-date compares with SKIN’s 5.3% decline. But which stock is a better buy now? Let’s find out.
On September 21, SKIN announced its collaboration with Epicutis, a new professional, medical-grade luxury skincare line that treats skin health with science-backed ingredients. The company expects this partnership to expand its portfolio of customized treatment solutions.
In August, NUS showcased its range of at-home beauty devices. The popularity of home-use beauty devices has skyrocketed over the past year as people were compelled to stay at home, providing a broader market for NUS products. Given the brand’s popularity worldwide, NUS is expected to grow further with prominent product launches and technological advancements.
Recent Financial Results
SKIN’s net sales increased 371.2% year-over-year to $66.51 million in the fiscal second quarter that ended June 30. Gross profit stood at $47.25 million, up 1,005% from the same period last year. However, its net loss grew 1,240.6% from the year-ago loss to $139.38 million. The company’s net loss per share increased 406.7% year-over-year to $1.52.
For the second quarter that ended June 30, NUS’ revenue increased 15% year-over-year to $704.06 million. Its gross profit grew 16.1% from its year-ago value to $532.08 million, while its net income improved 41.8% from the same period last year to $59.34 million. The company’s EPS improved 42% year-over-year to $1.15.
Expected Financial Performance
Analysts expect SKIN’s revenue to increase 27.7% in the next year. The company’s EPS is expected to grow 122% in the next year.
On the other hand, Street expects NUS’ revenue to increase 7.5% in the current year and 2.3% in the next year. The company’s EPS is expected to grow 15.7% in the current year and 7.1% in the following year. Moreover, NUS’ EPS is expected to grow 6.8% per annum over the next five years.
NUS is more profitable with a gross profit margin and EBITDA margin of 74.56% and 13.62%, compared to SKIN’s 65.95% and negative 6.82%, respectively.
Furthermore, NUS’ ROTC and net income margin of 13.62% and 8.35% compare with SKIN’s negative 5.73% and 81.70%, respectively.
Thus, NUS is more profitable here.
In terms of forward EV/Sales, SKIN is currently trading at 14.07x, 94% higher than NUS, which is currently trading at 0.84x. Also, SKIN’s forward EV/EBITDA ratio of 134.07 is 95.8% higher than NUS’s 5.65.
Thus, NUS is relatively affordable here.
NUS has an overall grade of B, which equates to a Buy rating in our proprietary POWR Ratings system. On the other hand, SKIN has an overall grade of D, which translates to a Sell rating. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
NUS has a grade of A for Value. NUS’ non-GAAP forward P/E ratio of 9.54 is 49.3% lower than the industry average of 18.80. On the other hand, SKIN has a grade of D for Value. This is justified as SKIN’s non-GAAP forward P/E ratio of 421.28 is 2,141.3% higher than the industry average.
The beauty industry is expected to benefit from the growing demand for skincare products. Both SKIN and NUS are expected to benefit from the industry tailwinds. However, with a lower valuation and higher profitability, NUS is a better buy here.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all top-rated stocks in the Medical – Consumer Goods industry here. Also, click here to view the top-rated stocks in the Consumer Goods industry.
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SKIN shares were trading at $26.89 per share on Thursday afternoon, up $0.73 (+2.79%). Year-to-date, SKIN has gained 137.75%, versus a 18.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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