Critical Contrast: L’Oreal (OTCMKTS:LRLCY) and RH (NYSE:RH)

RH (NYSE:RH) and L’Oreal (OTCMKTS:LRLCY) are both consumer staples companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, dividends, risk, profitability, valuation and earnings.

Insider and Institutional Ownership

90.2% of RH shares are owned by institutional investors. Comparatively, 0.4% of L’Oreal shares are owned by institutional investors. 26.9% of RH shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Profitability

This table compares RH and L’Oreal’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
RH	3.63%	-567.82%	2.62%
L’Oreal	N/A	N/A	N/A

Earnings & Valuation

This table compares RH and L’Oreal”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
RH	$3.44 billion	0.82	$124.79 million	$6.31	23.77
L’Oreal	$49.83 billion	4.78	$6.93 billion	N/A	N/A

L’Oreal has higher revenue and earnings than RH.

Risk and Volatility

RH has a beta of 1.91, suggesting that its stock price is 91% more volatile than the S&P 500. Comparatively, L’Oreal has a beta of 0.9, suggesting that its stock price is 10% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and target prices for RH and L’Oreal, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
RH	5	8	7	0	2.10
L’Oreal	1	6	6	1	2.50

RH currently has a consensus target price of $174.80, indicating a potential upside of 16.56%. Given RH’s higher possible upside, research analysts plainly believe RH is more favorable than L’Oreal.

Summary

RH beats L’Oreal on 7 of the 13 factors compared between the two stocks.

About RH

RH, together with its subsidiaries, operates as a retailer in the home furnishings market. The company offers products in various categories, including furniture, lighting, textiles, bathware, décor, outdoor and garden, baby, child, and teen furnishings. It provides its products through rh.com, rhbabyandchild.com, rhteen.com, rhmodern.com, and waterworks.com online channels, as well as operates RH Galleries, RH outlet stores, RH Guesthouse, and Waterworks showrooms in the United States, Canada, the United Kingdom, and Germany. The company was formerly known as Restoration Hardware Holdings, Inc. and changed its name to RH in January 2017. RH was incorporated in 2011 and is headquartered in Corte Madera, California.

About L’Oreal

L'Oréal S.A., through its subsidiaries, manufactures and sells cosmetic products for women and men worldwide. The company operates through four divisions: Consumer Products, L'oréal Luxe, Professional Products, and Dermatological Beauty. It offers skincare, make-up, hair colourants, haircare, perfumes, and hygiene products. The company provides its products under the L'Oréal Paris, Garnier, Maybelline New York, NYX Professional Makeup, Stylenanda, Essie, Dark & Lovely, Mixa, Magic Mask, Niley, Lancôme, Yves Saint Laurent, Armani, Kiehl's Since 1851, Helena Rubinstein, Biotherm, Shu Uemura, IT Cosmetics, Ralph Lauren Fragrance, Urban Decay, Mugler, Valentino, Viktor&Rolf, Azzaro, Prada, Cacharel, Maison Margela Fragrance, Diesel, Yue Sai, Atelier Colonge, Carita, Takami, Aesop, L'Oréal Professionnel Paris, Kérastase, Redken, Matrix, Pureology, Pulp Riot, La Roche-Posay, Vichy, CeraVe, SkinCeuticals, and Skinbetter Science brands. It sells its products through distribution channels, such as hair salons, local stores, e-commerce, travel retail, mass market retail, department store perfumeries, pharmacies, drug stores, medi-spas, and free-standing stores. L'Oréal S.A. was founded in 1909 and is headquartered in Clichy, France.