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Water-Logged And Getting Wetter Stock Of The Day: Avon Products (AVP)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Avon Products ( AVP) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Avon Products as such a stock due to the following factors:

  • AVP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $39.3 million.
  • AVP has traded 417,032 shares today.
  • AVP traded in a range 203.5% of the normal price range with a price range of $0.37.
  • AVP traded below its daily resistance level (quality: 74 days, meaning that the stock is crossing a resistance level set by the last 74 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on AVP:

Avon Products, Inc. manufactures and markets beauty and related products. The stock currently has a dividend yield of 1.7%. Currently there are 4 analysts that rate Avon Products a buy, 1 analyst rates it a sell, and 5 rate it a hold.

The average volume for Avon Products has been 4.2 million shares per day over the past 30 days. Avon has a market cap of $6.2 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.36 and a short float of 6.4% with 8.83 days to cover. Shares are down 19.1% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Avon Products as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:

  • 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 1128.5% when compared to the same quarter one year ago, falling from -$13.70 million to -$168.30 million.
  • Although AVP's debt-to-equity ratio of 2.96 is very high, it is currently less than that of the industry average. To add to this, AVP has a quick ratio of 0.70, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Personal Products industry and the overall market, AVON PRODUCTS's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.23%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1166.66% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • AVON PRODUCTS has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, AVON PRODUCTS swung to a loss, reporting -$0.01 versus $0.21 in the prior year. This year, the market expects an improvement in earnings ($0.81 versus -$0.01).

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