Investors have stepped back from many makeup and skincare stocks in recent months due to weak growth expectations in the industry. Consumers are becoming more cautious in their spending patterns here after nearly two full years of robust growth. Cyclical upturns always follow these pullbacks, though, and so investors might consider buying stocks in this space while the valuations are temporarily depressed.

Let's take a closer look at two large players in the makeup world, Ulta Beauty (ULTA 3.24%) and Estee Lauder (EL 1.22%), to see which one might be the better fit for your portfolio.

The latest growth

Ulta Beauty has by far the stronger growth profile right now. Sales in the most recent quarter were up 9% at existing locations, and that was on top of an 18% surge a year ago. Estee Lauder announced a 6% organic sales increase in the U.S., by contrast, yet its overall revenue was down 8% due to its heavy exposure to travel markets around Asia.

Looking deeper into Ulta's results reveals a mixed performance. Average spending fell 2% in the Q1 period that ended in late May, which was offset by a blazing 11% surge in customer traffic. These metrics reflect management's strategy of maintaining market share even while rivals are increasingly offering promotions on makeup and skincare products.

Profiting from makeup

Ulta Beauty also has the more attractive earnings outlook. Sure, management recently lowered its 2023 forecast for operating profit margin. But the company is still expecting profitability of around 15% of sales, down from last year's 16% mark. In May, Ulta reiterated its goal of achieving roughly $25 per share in annual earnings this year compared to last year's $24-per-share result.

Estee Lauder reduced its earnings outlook after citing a slower-than-expected rebound in travel markets around Asia. Despite struggles in that area, executives said the business performed well in all other geographies. "We are encouraged by the strong momentum in the rest of our business," CEO Fabrizio Freda said in a press release.

The better buy

Investors who are seeking more international exposure to the makeup and skincare industries might prefer Estee Lauder today. Its sales and earnings trends have the potential to rebound significantly once travel patterns return to normal following pandemic restrictions.

But Ulta Beauty looks like the better all-around stock. It has a clear path toward steady growth in the core U.S. market, with more international sales likely over the long term. Ulta's customers remain highly engaged, as evidenced by the recent traffic metrics, and the retailer is much more profitable now than it was during the pandemic. Shares are also available at a discount compared to Estee Lauder. You can buy Ulta for about 2.2 times sales, while Estee Lauder is valued at closer to 4 times annual revenue.

Ulta is a smaller company with more of a U.S.-focused sales footprint, potentially raising the risk around owning the stock. But it is growing its influence and boosting annual earnings at a pace that investors shouldn't ignore.