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Avon To Rise 27%, Outperforming Estee Lauder
Posted February 22, 2012
We Recommend...
Andrea Jung
By Takeover Analyst
Avon Products (AVP) continued to struggle operationally in the fourth quarter and the near-term outlook is weak. As I have stated earlier, the direct selling firm makes for a perfect activist target given its discount to intrinsic value, poor execution, and doubted management. Compared to Estée Lauder (EL), Avon is more undervalued but fails to close the gap primarily due to managerial missteps and weakening fundamentals.
From a multiples perspective, Avon is significantly cheaper than Estée Lader. It trades at a respective 16.1x and 11.1x past and forward earnings with an impressive (although doubted) dividend yield of 4.8%. Estée, on the other hand, trades at a respective 26.6x and 20.9x past and forward earnings. To put this under greater context, consider that Estée is valued at slightly more than its historical 5-year average PE multiple versus just 80% for Avon. READ FULL ARTICLE HERE
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