Yatsen Fell 67%, But The Story Isn't Over

If all that caught your eye about Yatsen was talk of growing skincare brands, tighter marketing and omni channel expansion, the actual outcome would have felt brutal. Holding Yatsen over the past year would have meant a 67.0% loss, including dividends. Recent results showed higher revenue but a much deeper net loss and weaker margin. If you had been weighing those upbeat 2025 forecasts, what warning signs were already on the table?

Narratives are how investors here put a case on the record, with explicit assumptions about revenue, margins and the multiple. Those assumptions imply an estimated Fair Value.

The easy part of this move is behind Yatsen. Zero in on 27 high quality undervalued stocks for companies trading below our estimates.

The Two Stories Yatsen Investors Were Choosing Between

The shares cost US$8.23 at the start of the period, and anyone looking at Yatsen then had to decide which of two very different stories felt more realistic.

The bullish narrative put fair value at US$9.18, roughly 12% above that entry price, and was based on skincare revenue growing 15.5% a year with profit margin eventually reaching 10.8%.

The bearish view anchored fair value at US$3.4, 59% below where Yatsen traded, and focused on the risk that heavier regulation and competition would require a much lower future P/E of 3.7x.

What The Results Changed For The Yatsen Story

The clearest new fact was Yatsen’s deeper loss. Net income moved from a loss of CN¥17.668m in Q2 2025 to a loss of CN¥90.828m in Q2 2026, with net margin falling from 1.6% to 8.0%. That challenged the bullish promise of improving profitability, even with revenue moving from CN¥1,086.732m to CN¥1,142.18m. The evidence supported the cautious case.

The lesson is simple. When a thesis leans on future margin repair, track net margin alongside sales. If profitability moves in the wrong direction, treat any growth story at another stock with extra scrutiny.

What Yatsen’s Lower Price Asks You To Believe

Yatsen now trades at US$2.56, with this Narrative’s Fair Value sitting above that level based on its own assumptions. The argument leans on premium skincare, research and development intensive product pipelines and broader Sephora distribution to support a healthier business mix than the recent loss suggests.

For the fall to look like an opening rather than a warning, a buyer today would need to believe that premiumization, cleaner beauty positioning and omnichannel reach can offset slower market growth and intense competition.

"Yatsen's omnichannel and data-driven direct-to-consumer model uniquely enables high customer retention and rapid marketing optimization at lower cost, so as digital and e-commerce adoption continues to surge in China and Southeast Asia, the company is poised for structurally lower customer acquisition costs, rising customer lifetime value, and operational leverage that benefits both revenue and net earnings growth."

That disagreement has a full argument behind it. → Uncover the higher Fair Value this Narrative argues for

Another Way To Read Yatsen

Yatsen lives in beauty, but your watchlist does not need to stop there.

The same consumer seeking better skincare often wants everyday hygiene to feel more premium.

One large supplier of tissues, diapers and wipes is leaning into that shift, pushing higher quality and more advanced materials across its range.

Management there is also working on cheaper fibers and tighter sourcing so rising input costs bite less into profits.

If that mix of premium demand and cost discipline holds, it could quietly reshape how you think about steady, essentials focused businesses.

The case is on the record, with the assumptions it rests on. → See the Narrative that values this company 20% above its price

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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