Rating Change #9

Avon Products Inc ( AVP) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, compelling growth in net income and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including generally poor debt management, weak operating cash flow and a generally disappointing performance in the stock itself.

Highlights from the ratings report include:
  • AVP's revenue growth has slightly outpaced the industry average of 6.0%. Since the same quarter one year prior, revenues slightly increased by 8.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Personal Products industry average. The net income increased by 23.0% when compared to the same quarter one year prior, going from $167.60 million to $206.20 million.
  • AVON PRODUCTS has improved earnings per share by 23.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, AVON PRODUCTS reported lower earnings of $1.35 versus $1.44 in the prior year. This year, the market expects an improvement in earnings ($2.05 versus $1.35).
  • Currently the debt-to-equity ratio of 1.59 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. To add to this, AVP has a quick ratio of 0.64, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has decreased to $119.80 million or 46.51% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Avon Products Inc. engages in manufacturing and marketing beauty and related products in worldwide. The company has a P/E ratio of 11.5, equal to the average consumer non-durables industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Avon has a market cap of $8.4 billion and is part of the consumer goods sector and consumer non-durables industry. Shares are down 31.8% year to date as of the close of trading on Friday.

You can view the full Avon Ratings Report or get investment ideas from our investment research center.

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