Avon Products (AVP) Stock Falls as Potential Suitors Turn Away

NEW YORK (TheStreet) -- Shares of Avon Products (AVP) were falling 6.6% to $7.63 following a report that no potential suitors are interested in buying the beauty products company or its North American business.

French competitor Coty (COTY) and some private equity firms were once interested in acquiring the company, but have since turned away, according to the New York Post. The companies were reportedly put off due to difficulty in financing an offer for Avon.

Coty previously offered to acquire Avon for $10 billion in 2012, but is now involved in the auction to buy Procter & Gamble's (PG) CoverGirl and Max Factor brands, according to the Post.

Reports of the lack of interest come a week after Avon reported poor first quarter results that missed analysts' expectations.

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 a number of negative factors, 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 378.6% when compared to the same quarter one year ago, falling from -$69.10 million to -$330.70 million.
  • The debt-to-equity ratio is very high at 8.98 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, AVP maintains a poor quick ratio of 0.79, which illustrates the inability to avoid short-term cash problems.
  • 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 $234.00 million or 47.21% 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 46.54%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 368.75% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • You can view the full analysis from the report here: AVP Ratings Report
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