LRLCF - L'Oréal: Record High Takes P/E To Near 50x; Downgrade To Neutral
- We are downgrading our rating on L'Oréal to Neutral due to valuation, after the stock gained 43% in 15 months to reach a new record.
- With shares now trading at near 50x 2020 EPS (and 45.8x 2019 EPS), a de-rating will likely offset most of the near-10% EPS CAGR we assume.
- As the market leader with a broad portfolio, L'Oréal can only outgrow the broader market (which historically grew at 4-6%) by so much.
- Our forecasts are based on a 37.5x P/E, a significant de-rating from the present but relatively high compared to the rest of our coverage.
- At €355.45, L'Oréal shares are expected to generate a total return of 14% (4% annualized, including 1% in dividends) by 2024 year-end.
For further details see:
L'Oréal: Record High Takes P/E To Near 50x; Downgrade To Neutral