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Avon Products Inc Stock Downgraded (AVP)

By TheStreet Wire 05/03/12 - 04:00 AM EDT

Find out if (AVP) is in Cramer's Portfolio.

NEW YORK (TheStreet) -- Avon Products (NYSE:AVP) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally poor debt management and weak operating cash flow.

Highlights from the ratings report include:

The gross profit margin for AVON PRODUCTS is rather high; currently it is at 63.20%. Regardless of AVP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AVP's net profit margin of 1.00% is significantly lower than the same period one year prior.
The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Personal Products industry. The net income has significantly decreased by 81.5% when compared to the same quarter one year ago, falling from $143.60 million to $26.50 million.
The debt-to-equity ratio is very high at 2.07 and currently higher than the industry average, implying that there is very poor management of debt levels within the company. To add to this, AVP has a quick ratio of 0.63, this demonstrates the lack of ability of the company to cover short-term liquidity needs.

Avon Products, Inc. manufactures and markets beauty and related products worldwide. The company has a P/E ratio of 18, below the average consumer non-durables industry P/E ratio of 18.3 and above the S&P 500 P/E ratio of 17.7. Avon has a market cap of $8.72 billion and is part of the consumer goods sector and consumer non-durables industry. Shares are up 13.7% year to date as of the close of trading on Wednesday.

You can view the full Avon Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet Ratings Staff

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