Up 27% In 6 Months, Is L’Oreal Stock Running Out Of Juice?

by Trefis Team
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LRLCY
L'Oreal
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L’Oreal stock (OTCMKTS: LRLCY) has seen an impressive rise of 27% over the last six months and currently trades at $91 per share. The sharp rally was driven by a recovery in beauty and cosmetics companies. With economies opening up, companies like L’Oreal and Estee Lauder have posted strong earnings in their most recent quarter, especially driven by revenue recovery. L’Oreal saw 5% growth in YoY revenues for Q1 2021, while strong competitor Estee Lauder saw a 15% rise in revenue for its most recent quarter (Q3 2021). With most companies expected to call people back to work before the end of 2021, beauty and cosmetics sales could get a further boost, and this has helped drive investor expectations, leading to a rise in share price for cosmetic companies. L’Oreal will be reporting its half-year 2021 earnings report later this week, which would provide further clarity on cosmetic product demand.

So, after the recent rally will L’Oreal’s stock continue its upward trajectory over the coming weeks, or is a correction in the stock more likely? According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for LRLCY stock average close to 0.7% in the next one-month (21 trading days) period after experiencing a 26.6% rise over the previous six-month (126 trading days) period. The stock has an average 46.8% probability of rising marginally over the next one month. But how would these numbers change if you are interested in holding LRLCY stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning to test L’Oreal stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

MACHINE LEARNING ENGINE – try it yourself:

IF L’Oreal stock moved by -5% over five trading days, THEN over the next 21 trading days, LRLCY stock moves an average of 3.6 percent, with a strong 73.6% probability of a positive return.

Some Fun Scenarios, FAQs & Making Sense of L’Oreal Stock Movements:

Question 1: Is the average return for LRLCY stock higher after a drop?

Answer:

Consider two situations,

Case 1: LRLCY stock drops by -5% or more in a week

Case 2: LRLCY stock rises by 5% or more in a week

Is the average return for LRLCY stock higher over the subsequent month after Case 1 or Case 2?

LRLCY stock fares better after Case 1, with an average return of 3.6% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 0% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how LRLCY stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer:

If you buy and hold L’Oreal stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For L’Oreal stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:

Question 3: What about the average return after a rise if you wait for a while?

Answer:

The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

LRLCY’s returns over the next N days after a 5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:

It’s pretty powerful to test the trend for yourself for LRLCY stock by changing the inputs in the charts above.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market since 2016.

 

See all Trefis Price Estimates and Download Trefis Data here

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