Perilous Reversal Watch: 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.

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 $125.8 million.
  • AVP has traded 295,940 shares today.
  • AVP is down 3.1% today.
  • AVP was up 6% yesterday.

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More details on AVP:

Avon Products, Inc. manufactures and markets beauty and related products worldwide. The stock currently has a dividend yield of 3.5%. Currently there is 1 analyst that rates Avon Products a buy, 1 analyst rates it a sell, and 9 rate it a hold.

The average volume for Avon Products has been 13.2 million shares per day over the past 30 days. Avon has a market cap of $2.9 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 2.33 and a short float of 18.7% with 4.60 days to cover. Shares are down 28% 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 weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Net operating cash flow has significantly decreased to -$198.10 million or 75.93% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • 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 47.38%, 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. 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.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Personal Products industry average, but is greater than that of the S&P 500. The net income increased by 12.5% when compared to the same quarter one year prior, going from -$168.30 million to -$147.30 million.
  • AVP, with its decline in revenue, underperformed when compared the industry average of 9.2%. Since the same quarter one year prior, revenues fell by 17.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • AVON PRODUCTS has improved earnings per share by 13.2% 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 poor results of -$0.88 versus -$0.01 in the prior year. This year, the market expects an improvement in earnings ($0.31 versus -$0.88).

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