Is The Market Pricing Avon Fairly?

-50.38%
Downside
5.57
Market
2.76
Trefis
AVP: Avon Products logo
AVP
Avon Products

Avon (NYSE: AVP), is a globally recognized leader in direct selling of beauty and related products. During the latest quarter, Avon’s net sales rose marginally to $5.56 billion, up 0.1% from the prior year. Its top line remained under pressure as the company continued to operate in challenging macro and competitive conditions, particularly in the largest markets. During the FY2017 annual earnings, the company realized more than $250 million in cost savings under its Transformation Plan, exceeding its cost savings target of $230 million. Consequently, the company reported earnings of $0.12 versus the estimate of $0.07, exceeded the market expectations after six quarters.

Looking ahead, Avon plans to make progress in a number of key areas including delivering competitive representative experience, rigorous performance management, insightful data & analytics, and a relentless focus on execution capabilities in 2018.

We anticipate the company to post progressive results in FY2018, as the management remains focused on the strategic initiatives to create long-term shareholder value by balancing top-line growth and strong margins. Enabled by its strategies, the company plans on driving out cost, improve financial resilience, and invest in growth over the next three years. Its long term financial goals include: mid-single digit constant dollar revenue growth and a low double-digit adjusted operating margin.
We expect the company’s revenue to be around $5.6 billion for FY2018 and net income margin to be 0.9%. We assume a Price-to-Earnings multiple of 25x and an average share count of 439.70 million, translating into a share price estimate of $2.90 per share, largely in line with its current market price.
 
  

Detailed steps to arrive at our price estimate are outlined in our interactive dashboard Is Avon Inc. Fairly PricedYou can modify the key value drivers to see how they impact the company’s revenues, bottom line, and valuation.

 

Like our charts? Explore example interactive dashboards and create your own.