Jefferies analysts reiterated their 'Underperform' rating on L'Oréal on Monday, lowering their price target from 326 to 323 euros. The broker suggests that the cosmetics giant's current valuation appears demanding relative to its underlying growth momentum.

In a research note, the broker indicates that the world leader in beauty has posted average annual like-for-like (LFL) growth of approximately 4.5% over the past two years. While this is considered a solid performance within the consumer goods sector, allowing L'Oréal to grow slightly faster than the global cosmetics market, the broker remains cautious.

This relative outperformance remains limited, however, with the group's growth estimated at roughly 1.1 to 1.2 times that of its market. Analysts point out that this pace does not fully align with the market's implicit expectations, given that the stock is currently trading at a multiple of approximately 26 times earnings.

A multiple deemed high relative to actual growth

Such a valuation would typically reflect annual growth closer to 5.5%, which is above the recently observed trend, the broker explains.

Furthermore, the progressive normalization of comparables is expected to result in a slowdown in quarterly growth rates. This leads Jefferies to forecast LFL sales growth of between 4% and 4.5% in the coming quarters—a level in line with current trends but lacking any further acceleration.

Against this backdrop, analysts believe that moderate growth could exert further downward pressure on the stock's valuation.