Avon Products, Inc. (AVP) Might Reach $25 In Two Years – Revlon Inc (REV), Tupperware Brands Corporation (TUP)

Page 1 of 2

In a previous article, I talked about PNC Financial Services (NYSE:PNC), a financial services firm that Brian Rogers, chairman and chief investment officer of T. Rowe Price, recommended at the 2013 Barron’s Roundtable. In this article, I will focus on another stock that he liked: Avon Products, Inc. (NYSE:AVP), the direct selling company with beauty and fashion-related products.

2012 Losses With High Amount of Debt

Avon, incorporated in 1916, is a global manufacturing and direct selling company in 65 countries and territories with three main product categories: Beauty (cosmetics, fragrances, skin care), Fashion (watches, jewelry, accessories) and Home (decorative products, housewares). The majority of Avon’s revenue, $7.64 billion, or 71.4% of the total revenue, was generated from the Beauty category. The Fashion category ranked second with $1.89 billion in revenue in 2012, while the Home category generated more than $1 billion in 2012 revenue. In terms of geography sales, Avon seemed to be quite strong in Latin America, with nearly $5 billion in 2012 sales. Europe, Middle East & Africa ranked second with $2.9 billion in sales.

Avon Products, Inc. (NYSE:AVP)In the full year 2012, the total revenue decreased by 5% to $10.7 billion. The operating profit experienced a significant decrease of 63% to $315 million. However, Avon generated losses of $42.5 million, or a loss of $0.10 per share. At first glance, investors might be scared of Avon’s high level of debt compared to its equity. As of December 2012, Avon Products, Inc. (NYSE:AVP) had $1.23 billion in total stockholders’ equity, $1.2 billion in cash, and nearly $3.2 billion in short and long-term debt. However, the low equity base was due to the fact that Avon has bought back a significant amount of its own shares over time. The treasury stock has reached $4.57 billion in December 2012.

$25 Per Share in the Next Two Years

Five years ago, Avon traded at around $40-$50 per share. At this time of writing, the company is trading at nearly $20.50 per share. At the beginning of 2012, Coty, a French beauty products maker, offered to acquire Avon at around $23.25 per share. Several months later, Coty made a second offer of $24.75 per share, valuing Avon at $10.7 billion. What makes Coty interested in Avon was Avon’s distribution abilities and good product R&D. However, as there was no response from Avon, Coty withdrew its bid. Brian Rogers thought that in a friendly transaction, Avon could have gotten a $25 – $26 per share offer. He was betting on Avon’s new CEO, Sheri McCoy, who had been working for Johnson & Johnson for 30 years. McCoy has already launched a big cost-cutting program to get the profit margin back to historical levels. Thus, it might earn $1.50 – $1.75 per share in the period of 2-4 years. If a consumer-products multiple was applied to Avon, Rogers thought Avon’s share price might reach $25 in two years.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!