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 "perilous reversal" (up big yesterday but down big today) 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 $134.4 million.
  • AVP has traded 520,589 shares today.
  • AVP is down 3.9% today.
  • AVP was up 14.6% yesterday.

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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 3.2%. Currently there are 2 analysts that rate Avon Products a buy, 1 analyst rates it a sell, and 7 rate it a hold.

The average volume for Avon Products has been 10.7 million shares per day over the past 30 days. Avon has a market cap of $3.3 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 2.04 and a short float of 16.3% with 3.90 days to cover. Shares are down 19.5% year-to-date as of the close of trading on Wednesday.

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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 generally high debt management risk, disappointing return on equity and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The debt-to-equity ratio is very high at 2.89 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 0.67, 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.
  • AVP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 54.73%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last 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.
  • AVP, with its decline in revenue, underperformed when compared the industry average of 5.5%. Since the same quarter one year prior, revenues slightly dropped by 8.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for AVON PRODUCTS is rather high; currently it is at 64.23%. 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, the net profit margin of 4.27% trails the industry average.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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