AVP - Embedded Expectations Analysis - 2018 04 04
Avon Products, Inc. (AVP:USA) currently trades near historical lows relative to UAFRS-based (Uniform) Assets, with a 21.2x Uniform P/E. At these levels, the market is pricing in somewhat bullish expectations for the firm, but management has concerns about growth, brand awareness, and their balance sheetSpecifically, management is confident that they have seen higher levels of bad debt as a result of changes in regulations on collection processes in Mexico introduced in Q2, and in declining growth in Asia Pacific excluding the Philippines. Furthermore, they may lack confidence in their ability to successfully transform their culture given how rapidly the world is changing, and may be downplaying concerns about the relevance of direct selling strategies in the future. Moreover, they may be downplaying concerns about brand awareness, and may be exaggerating their focus on innovation. In addition, they may lack confidence in their ability to continue strengthening their balance sheet, and may be downplaying concerns about their investment process
Avon Products is a manufacturer and marketer of beauty and related products. The company's product categories are Beauty and Fashion and Home. Beauty consists of skincare, fragrance and color (cosmetics). Fashion and Home consists of fashion jewelry, watches, apparel, footwear, accessories, gift and decorative products, housewares, entertainment and leisure products, children's products and nutritional products. The company's business is conducted primarily in one channel, direct selling. The company's reportable segments are based on geographic operations in four regions: Europe, Middle East & Africa; South Latin America; North Latin America; and Asia Pacific.
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