What Is the Fundamental Value of Revlon Based On Expected 2019 Results?

Revlon (NYSE: REV), one of the world’s biggest cosmetics companies, has been modest in the recent quarterly earnings where net sales were slightly positive y-o-y  on a constant currency basis driven by strong growth in the Revlon segment in North America and growth in the Elizabeth Arden segment. Revlon’s recent performance has been a reflection of their continuous effort toward strengthening their business strategy and putting forth efforts to stabilize their business operations. We are seeing strong growth prospects in their strategic focus areas as they continue to work toward building momentum across their businesses. Revlon has also announced their 2018 Optimization Program, which is expected to deliver in the range of approximately $125 million to $150 million of annualized cost reductions by the end of 2019.

Revlon’s Elizabeth Arden segment brand has performed well recently driven by new launches and a strong digital presence. Its net sales rose 16.5% to $122.1 Mn, primarily driven by higher net sales of Elizabeth Arden skin care products, including Ceramide and Prevage, principally in international markets. Revlon is on track to attain integration synergies of $190 million by 2020 in restructuring and related charges in connection with implementing actions under the Elizabeth Arden Integration Program in 2019.

We have summarized our forecasts in an interactive dashboard Revlon’s Fundamental Value Based On Expected FY ’19 Results. You can modify assumptions such as changes in expected segment revenue or EBITDA margins to see how they impact the company’s value. The image below shows one of the key steps in identifying Revlon’s valuation sensitivity to changes in its segment revenues. We detail how changes in revenue or segment EBITDA margin impacts total EBITDA, which then impacts value (assuming a constant PE multiple).

With the initiatives adopted by Revlon’s top management for a brand makeover, the company is positive that the new changes will now steer Revlon toward higher growth in 2019 and beyond. We believe that Revlon has the key advantages in terms of innovation, brand power, digital prowess, and the quality of its teams all over the world to continue to drive growth and hold on to its position in the Beauty market. If you have a different view, you can modify various inputs to see how changing inputs impacts the company’s valuation. You can share the links to scenarios created on our platform.

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