5 Most Undervalued Stocks Under $5 to Buy

4. Coty Inc. (NYSE:COTY)

Stock Price: $2.24

Forward P/E: ~7.0x

Number of Hedge Fund Holders: 32

Coty Inc. (NYSE:COTY) is one of the Most Undervalued Stocks Under $5 to Buy. On July 7, analyst Susan Anderson from Canaccord Genuity maintained a “Hold” rating on the company’s stock and maintained a price objective of $2.50. The analyst’s rating is supported by factors related to the company’s Gucci Beauty license transition and capital allocation plans.

The early transfer of the Gucci license to Kering resulted in securing ~$400 million in proceeds and significantly enhanced Coty Inc. (NYSE:COTY)’s financial flexibility. It also removed a successful, fast-growing franchise that was a critical driver of prestige revenue and brand equity. While the disciplined usage of cash to reduce leverage, make investments in priority prestige brands, as well as streamline the organization aids the strong balance sheet and a more focused portfolio, the long-term growth impact as a result of losing Gucci is uncertain.

As per the analyst, the transaction is strategically sensible and validates Coty Inc. (NYSE:COTY)’s licensing capabilities. However, the offsetting of Gucci’s eventual revenue and profit contribution is expected to take time, which limits the near-term upside.

Coty Inc. (NYSE:COTY) is engaged in manufacturing, marketing, distributing, and selling branded beauty products.