LRLCY - L'Oreal is a catalyst call buy idea at Deutsche Bank

2023-03-13 07:37:39 ET

Deutsche Bank issued a catalyst call buy idea on L'Oreal S.A. ( OTCPK:LRLCF ) on Monday,

Analyst Tom Sykes said the basis for the short-term investment idea is the firm's proprietary dbDIG data that has shown an acceleration in distribution activity on a year-over-year basis. Sykes noted the development has historically led the L'Oreal share price performance by around four months.

"At the same time China money supply growth has accelerated and the company over indexes to China. The current earnings relative is around 10-15% too low vs MSCI World compared to the change in money supply growth differential between China and the EU/US, in our view."

In terms of valuation, L'Oreal ( OTCPK:LRLCF ) is noted to be at 31X forward earnings 12m consensus earnings and on a 1.96X PE relative vs MSCI World (median 1.73X). While the stock is elevated in valuation historically, Deutsche Bank expects EPS outperformance to offset any near term de-rating risk. Also of note, L'Oreal stock is noted to have historically outperformed the market heading into previous U.S. recessions and has an option on faster growth than expected, given China exposure and the structural growth in the model.

Shares of L'Oreal rose 0.50% in early afternoon trading in Paris.

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