Why Avon (AVP) Stock Is Slipping Today

NEW YORK (TheStreet) -- Shares of Avon Products, Inc.  (AVP) are slipping, down 2.93% to $13.26 in pre-market trading this morning, after the beauty products company was downgraded to "neutral" from "buy" with a $15 price target at Citigroup (C)  following the resignation of the company's CFO.

The firm cited less confidence in Avon's recovery following the departure of CFO Kimberly Ross.

Avon announced its CFO resignation yesterday after the closing bell.

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Separately, TheStreet Ratings team rates AVON PRODUCTS as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate AVON PRODUCTS (AVP) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. 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, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 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 41.2% when compared to the same quarter one year ago, falling from $32.30 million to $19.00 million.
  • The debt-to-equity ratio is very high at 2.79 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, AVP has a quick ratio of 0.69, 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.
  • Net operating cash flow has decreased to $105.50 million or 43.91% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 30.75%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 78.94% 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.
  • You can view the full analysis from the report here: AVP Ratings Report

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