How Is Avon’s Financial Health And What Are The Implications?
- From the above analysis we can conclude that Avon Products needs major improvement in its financial strength.
- Avon’s cash asset ratio is around 0.50 , suggesting that the company will be able to pay off only half of its near term obligations by using just its cash.
- The value of its assets that can be quickly converted to cash is around 75% short-term liabilities. However, its current ratio is greater than one implying that its total current assets will be sufficient to pay off all its current liabilities.
- Avon’s shareholder’s equity is negative, an indication that the company has been running heavy financial losses and is definitely not an attractive stock to buy right now. Over 60% of its assets are supported by debt.
- Avon’s interest coverage ratio of 0.24 implies that the company doesn’t have the capability to repay the current interests on its debt with the help of its available earnings. This is because Avon is barely profitable.
In conclusion, going by its Q1 2016 financial figures, we can state that Avon needs to go a long way in order to recover its financial health. The company has taken big steps towards that end like selling off its North American business a few months back and receiving over $500 million in funding from Cerberus Capital. In Q1 2016, it deconsolidated its loss making Venezuela unit. The company expects its new operating model framework to save around $70 million by the end of this year. If these measures also do not help in the restoration of Avon’s financial performance, there seems to be a chance of Avon becoming a takeover target in the future.
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Have more questions about Avon Products (NYSE:AVP)? See the links below:
- What Is Avon’s Fundamental Value Based On 2016 Estimated Numbers?
- Revlon Versus Avon: How Do The Top Line And Bottom Lines Fare Currently?
- Why We’re Revising Our Price Estimate For Avon From $3 To $5?
- What Led To Avon’s Revenue And EBITDA Decline Over The Last Five Years?
- How Did Avon’s Different Segments Perform Over The Last 5 Years?
- What To Expect From Avon Products Q1 2016 Results?
- Avon Products Q1 2016 Results
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