Avon Products (AVP) Stock Lower Following Bogus Buyout Fiasco

NEW YORK (TheStreet) -- Shares of Avon Products (AVP) are down by 0.28% to $7.05 in late morning trading on Friday, one day after a mysterious buyout offer sent the beauty products manufacturer and seller's stock soaring.

The offer would ultimately be identified as a hoax, with serious questions raised as to how the so called PTG Capital Partners, which was believed to be a British investment firm, was able to submit the regulatory filing to the SEC. PTG Capital's offer of $18.75 per share was about three times Avon's value.

In the 25 minutes after the takeover filing was released around $91 million worth of Avon Products' stock had exchanged hands, Bloomberg calculated.

The stock's rally started to ease up after reports that the firm and the Texas-based lawyer listed in the filing do not exist. Avon itself released a statement saying it has received no buyout offer and could not confirm the existence of PTG.

The question of who is behind the fake filing still remains. The SEC is reviewing the filing, the Wall Street Journal reported.

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 multiple 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 weak operating cash flow and generally disappointing historical performance in the stock itself."

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

  • 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).
  • You can view the full analysis from the report here: AVP Ratings Report

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