Intrinsic value of Avon Products - AVP

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$3.46

  Intrinsic Value

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  Value-price divergence*

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$3.46

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of AVP stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -7.19
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  5,718
  9,149
  14,135
  21,139
  30,671
  43,273
  59,490
  79,853
  104,852
  134,919
  170,414
  211,615
  258,720
  311,844
  371,033
  436,269
  507,486
  584,581
  667,430
  755,900
  849,856
  949,176
  1,053,756
  1,163,518
  1,278,411
  1,398,418
  1,523,554
  1,653,873
  1,789,461
  1,930,442
  2,076,974
Variable operating expenses, $m
 
  8,905
  13,754
  20,564
  29,833
  42,086
  57,855
  77,655
  101,963
  131,199
  165,712
  205,765
  251,568
  303,224
  360,776
  424,209
  493,457
  568,421
  648,980
  735,004
  826,362
  922,937
  1,024,626
  1,131,354
  1,243,071
  1,359,760
  1,481,437
  1,608,153
  1,739,993
  1,877,077
  2,019,558
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  5,395
  8,905
  13,754
  20,564
  29,833
  42,086
  57,855
  77,655
  101,963
  131,199
  165,712
  205,765
  251,568
  303,224
  360,776
  424,209
  493,457
  568,421
  648,980
  735,004
  826,362
  922,937
  1,024,626
  1,131,354
  1,243,071
  1,359,760
  1,481,437
  1,608,153
  1,739,993
  1,877,077
  2,019,558
Operating income, $m
  323
  244
  381
  575
  838
  1,187
  1,635
  2,198
  2,889
  3,720
  4,702
  5,850
  7,152
  8,621
  10,257
  12,060
  14,029
  16,160
  18,450
  20,896
  23,493
  26,239
  29,130
  32,164
  35,340
  38,658
  42,117
  45,720
  49,468
  53,365
  57,416
EBITDA, $m
  437
  418
  645
  965
  1,400
  1,975
  2,715
  3,645
  4,786
  6,158
  7,778
  9,659
  11,809
  14,234
  16,935
  19,913
  23,164
  26,683
  30,464
  34,502
  38,791
  43,324
  48,098
  53,108
  58,352
  63,829
  69,541
  75,489
  81,678
  88,113
  94,801
Interest expense (income), $m
  87
  79
  86
  177
  305
  480
  710
  1,006
  1,379
  1,836
  2,385
  3,034
  3,787
  4,648
  5,619
  6,701
  7,893
  9,195
  10,604
  12,119
  13,736
  15,453
  17,269
  19,180
  21,186
  23,287
  25,480
  27,767
  30,149
  32,628
  35,205
Earnings before tax, $m
  31
  165
  295
  398
  533
  707
  925
  1,192
  1,511
  1,885
  2,316
  2,816
  3,365
  3,973
  4,638
  5,359
  6,136
  6,965
  7,846
  8,777
  9,758
  10,786
  11,861
  12,984
  14,154
  15,371
  16,637
  17,952
  19,318
  20,737
  22,211
Tax expense, $m
  124
  44
  80
  107
  144
  191
  250
  322
  408
  509
  625
  760
  909
  1,073
  1,252
  1,447
  1,657
  1,881
  2,118
  2,370
  2,635
  2,912
  3,203
  3,506
  3,822
  4,150
  4,492
  4,847
  5,216
  5,599
  5,997
Net income, $m
  -108
  120
  215
  290
  389
  516
  675
  870
  1,103
  1,376
  1,691
  2,056
  2,456
  2,900
  3,386
  3,912
  4,479
  5,084
  5,728
  6,407
  7,123
  7,874
  8,659
  9,478
  10,332
  11,221
  12,145
  13,105
  14,102
  15,138
  16,214

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  654
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  3,419
  4,424
  6,835
  10,222
  14,831
  20,925
  28,767
  38,614
  50,702
  65,241
  82,405
  102,328
  125,106
  150,795
  179,416
  210,962
  245,399
  282,679
  322,742
  365,522
  410,955
  458,983
  509,553
  562,630
  618,187
  676,217
  736,728
  799,745
  865,310
  933,483
  1,004,339
Adjusted assets (=assets-cash), $m
  2,765
  4,424
  6,835
  10,222
  14,831
  20,925
  28,767
  38,614
  50,702
  65,241
  82,405
  102,328
  125,106
  150,795
  179,416
  210,962
  245,399
  282,679
  322,742
  365,522
  410,955
  458,983
  509,553
  562,630
  618,187
  676,217
  736,728
  799,745
  865,310
  933,483
  1,004,339
Revenue / Adjusted assets
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
Average production assets, $m
  822
  1,317
  2,035
  3,044
  4,417
  6,231
  8,567
  11,499
  15,099
  19,428
  24,540
  30,473
  37,256
  44,906
  53,429
  62,823
  73,078
  84,180
  96,110
  108,850
  122,379
  136,681
  151,741
  167,547
  184,091
  201,372
  219,392
  238,158
  257,682
  277,984
  299,084
Working capital, $m
  506
  -210
  -325
  -486
  -705
  -995
  -1,368
  -1,837
  -2,412
  -3,103
  -3,920
  -4,867
  -5,951
  -7,172
  -8,534
  -10,034
  -11,672
  -13,445
  -15,351
  -17,386
  -19,547
  -21,831
  -24,236
  -26,761
  -29,403
  -32,164
  -35,042
  -38,039
  -41,158
  -44,400
  -47,770
Total debt, $m
  1,894
  2,054
  4,224
  7,272
  11,420
  16,904
  23,962
  32,824
  43,704
  56,789
  72,237
  90,168
  110,668
  133,788
  159,547
  187,938
  218,931
  252,483
  288,540
  327,042
  367,932
  411,156
  456,670
  504,439
  554,441
  606,668
  661,127
  717,843
  776,851
  838,206
  901,977
Total liabilities, $m
  3,822
  3,982
  6,152
  9,200
  13,348
  18,832
  25,890
  34,752
  45,632
  58,717
  74,165
  92,096
  112,596
  135,716
  161,475
  189,866
  220,859
  254,411
  290,468
  328,970
  369,860
  413,084
  458,598
  506,367
  556,369
  608,596
  663,055
  719,771
  778,779
  840,134
  903,905
Total equity, $m
  -403
  442
  684
  1,022
  1,483
  2,092
  2,877
  3,861
  5,070
  6,524
  8,241
  10,233
  12,511
  15,080
  17,942
  21,096
  24,540
  28,268
  32,274
  36,552
  41,096
  45,898
  50,955
  56,263
  61,819
  67,622
  73,673
  79,975
  86,531
  93,348
  100,434
Total liabilities and equity, $m
  3,419
  4,424
  6,836
  10,222
  14,831
  20,924
  28,767
  38,613
  50,702
  65,241
  82,406
  102,329
  125,107
  150,796
  179,417
  210,962
  245,399
  282,679
  322,742
  365,522
  410,956
  458,982
  509,553
  562,630
  618,188
  676,218
  736,728
  799,746
  865,310
  933,482
  1,004,339
Debt-to-equity ratio
  -4.700
  4.640
  6.180
  7.110
  7.700
  8.080
  8.330
  8.500
  8.620
  8.700
  8.770
  8.810
  8.850
  8.870
  8.890
  8.910
  8.920
  8.930
  8.940
  8.950
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
Adjusted equity ratio
  -0.382
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -108
  120
  215
  290
  389
  516
  675
  870
  1,103
  1,376
  1,691
  2,056
  2,456
  2,900
  3,386
  3,912
  4,479
  5,084
  5,728
  6,407
  7,123
  7,874
  8,659
  9,478
  10,332
  11,221
  12,145
  13,105
  14,102
  15,138
  16,214
Depreciation, amort., depletion, $m
  114
  174
  264
  390
  561
  788
  1,080
  1,447
  1,897
  2,438
  3,077
  3,809
  4,657
  5,613
  6,679
  7,853
  9,135
  10,522
  12,014
  13,606
  15,297
  17,085
  18,968
  20,943
  23,011
  25,172
  27,424
  29,770
  32,210
  34,748
  37,386
Funds from operations, $m
  -198
  294
  479
  680
  951
  1,305
  1,756
  2,317
  2,999
  3,814
  4,768
  5,865
  7,113
  8,513
  10,064
  11,765
  13,614
  15,607
  17,741
  20,014
  22,420
  24,959
  27,626
  30,422
  33,344
  36,393
  39,569
  42,875
  46,313
  49,886
  53,600
Change in working capital, $m
  -258
  -79
  -115
  -161
  -219
  -290
  -373
  -468
  -575
  -692
  -816
  -948
  -1,083
  -1,222
  -1,361
  -1,500
  -1,638
  -1,773
  -1,906
  -2,035
  -2,161
  -2,284
  -2,405
  -2,525
  -2,643
  -2,760
  -2,878
  -2,997
  -3,119
  -3,243
  -3,370
Cash from operations, $m
  60
  346
  594
  841
  1,170
  1,594
  2,129
  2,785
  3,574
  4,505
  5,584
  6,812
  8,197
  9,735
  11,425
  13,266
  15,252
  17,380
  19,647
  22,048
  24,581
  27,243
  30,032
  32,946
  35,986
  39,153
  42,447
  45,872
  49,431
  53,129
  56,970
Maintenance CAPEX, $m
  0
  -103
  -165
  -254
  -380
  -552
  -779
  -1,071
  -1,437
  -1,887
  -2,429
  -3,067
  -3,809
  -4,657
  -5,613
  -6,679
  -7,853
  -9,135
  -10,522
  -12,014
  -13,606
  -15,297
  -17,085
  -18,968
  -20,943
  -23,011
  -25,172
  -27,424
  -29,770
  -32,210
  -34,748
New CAPEX, $m
  -93
  -495
  -718
  -1,009
  -1,373
  -1,815
  -2,335
  -2,932
  -3,600
  -4,330
  -5,111
  -5,933
  -6,783
  -7,650
  -8,523
  -9,394
  -10,255
  -11,102
  -11,930
  -12,740
  -13,530
  -14,302
  -15,060
  -15,806
  -16,545
  -17,281
  -18,020
  -18,766
  -19,525
  -20,301
  -21,101
Cash from investing activities, $m
  -177
  -598
  -883
  -1,263
  -1,753
  -2,367
  -3,114
  -4,003
  -5,037
  -6,217
  -7,540
  -9,000
  -10,592
  -12,307
  -14,136
  -16,073
  -18,108
  -20,237
  -22,452
  -24,754
  -27,136
  -29,599
  -32,145
  -34,774
  -37,488
  -40,292
  -43,192
  -46,190
  -49,295
  -52,511
  -55,849
Free cash flow, $m
  -117
  -252
  -289
  -422
  -583
  -772
  -986
  -1,218
  -1,463
  -1,712
  -1,956
  -2,188
  -2,395
  -2,572
  -2,711
  -2,807
  -2,856
  -2,856
  -2,806
  -2,705
  -2,554
  -2,356
  -2,113
  -1,827
  -1,502
  -1,140
  -744
  -318
  137
  617
  1,121
Issuance/(repayment) of debt, $m
  -261
  178
  2,170
  3,048
  4,149
  5,484
  7,058
  8,862
  10,880
  13,085
  15,447
  17,931
  20,500
  23,120
  25,759
  28,391
  30,994
  33,552
  36,056
  38,502
  40,890
  43,224
  45,514
  47,769
  50,002
  52,227
  54,460
  56,715
  59,008
  61,355
  63,771
Issuance/(repurchase) of shares, $m
  421
  920
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  137
  1,098
  2,170
  3,048
  4,149
  5,484
  7,058
  8,862
  10,880
  13,085
  15,447
  17,931
  20,500
  23,120
  25,759
  28,391
  30,994
  33,552
  36,056
  38,502
  40,890
  43,224
  45,514
  47,769
  50,002
  52,227
  54,460
  56,715
  59,008
  61,355
  63,771
Total cash flow (excl. dividends), $m
  -30
  -74
  1,881
  2,626
  3,565
  4,712
  6,072
  7,644
  9,417
  11,374
  13,492
  15,743
  18,105
  20,548
  23,048
  25,584
  28,137
  30,696
  33,250
  35,797
  38,335
  40,868
  43,401
  45,942
  48,500
  51,088
  53,716
  56,397
  59,145
  61,973
  64,892
Retained Cash Flow (-), $m
  -667
  -1,481
  -241
  -339
  -461
  -609
  -784
  -985
  -1,209
  -1,454
  -1,716
  -1,992
  -2,278
  -2,569
  -2,862
  -3,155
  -3,444
  -3,728
  -4,006
  -4,278
  -4,543
  -4,803
  -5,057
  -5,308
  -5,556
  -5,803
  -6,051
  -6,302
  -6,556
  -6,817
  -7,086
Prev. year cash balance distribution, $m
 
  636
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  0
  1,640
  2,288
  3,104
  4,103
  5,288
  6,659
  8,208
  9,920
  11,775
  13,751
  15,827
  17,979
  20,186
  22,429
  24,694
  26,968
  29,244
  31,519
  33,792
  36,065
  38,344
  40,634
  42,944
  45,285
  47,665
  50,096
  52,589
  55,155
  57,807
Discount rate, %
 
  10.60
  11.13
  11.69
  12.27
  12.88
  13.53
  14.21
  14.92
  15.66
  16.44
  17.27
  18.13
  19.04
  19.99
  20.99
  22.04
  23.14
  24.30
  25.51
  26.79
  28.12
  29.53
  31.01
  32.56
  34.19
  35.90
  37.69
  39.57
  41.55
  43.63
PV of cash for distribution, $m
 
  0
  1,328
  1,642
  1,954
  2,238
  2,470
  2,628
  2,699
  2,678
  2,569
  2,385
  2,143
  1,866
  1,574
  1,287
  1,020
  784
  583
  420
  293
  198
  129
  81
  50
  29
  16
  9
  5
  2
  1
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

Avon Products, Inc. manufactures and markets beauty and related products in Europe, the Middle East, Africa, South Latin America, North Latin America, and the Asia Pacific. The company offers beauty products, including skincare products that include personal care products, as well as fragrances and color cosmetics; and fashion and home products, such as fashion jewelry, watches, apparel, footwear, accessories, gift and decorative products, housewares, entertainment and leisure products, childrenÂ’s products, and nutritional products. It sells its products through direct selling by representatives. The company was founded in 1886 and is headquartered in London, the United Kingdom.

FINANCIAL RATIOS  of  Avon Products (AVP)

Valuation Ratios
P/E Ratio -14
Price to Sales 0.3
Price to Book -3.8
Price to Tangible Book
Price to Cash Flow 25.2
Price to Free Cash Flow -45.9
Growth Rates
Sales Growth Rate -7.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 1.1%
Cap. Spend. - 3 Yr. Gr. Rate -13.9%
Financial Strength
Quick Ratio 36
Current Ratio 0
LT Debt to Equity -465.5%
Total Debt to Equity -470%
Interest Coverage 1
Management Effectiveness
Return On Assets -10.1%
Ret/ On Assets - 3 Yr. Avg. -46.7%
Return On Total Capital -8.2%
Ret/ On T. Cap. - 3 Yr. Avg. -25.9%
Return On Equity 14.7%
Return On Equity - 3 Yr. Avg. 84.6%
Asset Turnover 1.6
Profitability Ratios
Gross Margin 60.5%
Gross Margin - 3 Yr. Avg. 60.4%
EBITDA Margin 4.1%
EBITDA Margin - 3 Yr. Avg. 4.6%
Operating Margin 5.6%
Oper. Margin - 3 Yr. Avg. 4.3%
Pre-Tax Margin 0.5%
Pre-Tax Margin - 3 Yr. Avg. 0.9%
Net Profit Margin -1.9%
Net Profit Margin - 3 Yr. Avg. -8.3%
Effective Tax Rate 400%
Eff/ Tax Rate - 3 Yr. Avg. 1433.3%
Payout Ratio 0%

AVP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AVP stock intrinsic value calculation we used $5718 million for the last fiscal year's total revenue generated by Avon Products. The default revenue input number comes from 2016 income statement of Avon Products. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AVP stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 10.6%, whose default value for AVP is calculated based on our internal credit rating of Avon Products, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Avon Products.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AVP stock the variable cost ratio is equal to 97.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for AVP stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.2% for Avon Products.

Corporate tax rate of 27% is the nominal tax rate for Avon Products. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AVP stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AVP are equal to 14.4%.

Life of production assets of 8 years is the average useful life of capital assets used in Avon Products operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AVP is equal to -2.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $-403 million for Avon Products - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 423.077 million for Avon Products is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Avon Products at the current share price and the inputted number of shares is $1.5 billion.


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COMPANY NEWS

▶ Avon Down 30% as CEO Steps Down: A Buy?   [Jun-16-17 06:45PM  Investopedia]
▶ Avon Stock Falls as CEO McCoy Expected to Step Down   [Jun-15-17 11:38AM  TheStreet.com]
▶ Avon CEO expected to step down: WSJ   [Jun-14-17 04:30PM  Reuters]
▶ Why Avon Products, Inc. Stock Fell 28% in May   [Jun-12-17 06:26PM  Motley Fool]
▶ [$$] Body Shop: full Brazilian   [Jun-09-17 08:03AM  Financial Times]
▶ ETFs with exposure to Avon Products, Inc. : May 30, 2017   [May-30-17 12:17PM  Capital Cube]
▶ 3 Top Stocks Under $5   [May-20-17 09:11AM  Motley Fool]
▶ U.S. charges Virginia man in Fitbit stock hoax   [May-19-17 06:35PM  Reuters]
▶ [$$] Activist Investors Have a New Bloodlust: CEOs   [May-17-17 12:21AM  The Wall Street Journal]
▶ [$$] Activist Investors Have a New Bloodlust: CEOs   [May-16-17 08:00AM  The Wall Street Journal]
▶ ETFs with exposure to Avon Products, Inc. : May 11, 2017   [May-11-17 04:12PM  Capital Cube]
▶ Beauty Companies Eye Millennial Customer Base   [May-10-17 05:11PM  Investopedia]
▶ Avon Announces Results Of Annual Meeting Of Shareholders   [May-09-17 05:53PM  PR Newswire]
▶ Avon Falling   [May-05-17 01:27PM  Bloomberg]
▶ Activist fund Barington calls for Avon CEO search   [May-04-17 06:31PM  Reuters]
▶ Avon Sinks Following Q1 Loss   [10:40AM  24/7 Wall St.]
▶ Avon reports 1Q loss   [06:57AM  Associated Press]
▶ Avon Reports First-Quarter 2017 Results   [06:45AM  PR Newswire]
▶ New Strong Sell Stocks for March 31st   [Mar-31-17 10:37AM  Zacks]
▶ Jeff Benjamin to retire as Avon's General Counsel   [Mar-20-17 02:30PM  PR Newswire]
▶ Five Stocks Under $5 to Buy Now   [Mar-15-17 01:48PM  Insider Monkey]
▶ Beauty Products Leaders Sink on Q4 Earnings   [Mar-06-17 04:13PM  Investopedia]
▶ Avon: Still Attractive After Selloff, Says Jefferies   [Feb-17-17 10:13AM  at Barrons.com]
▶ Why Avon Products, Inc. Stock Plummeted Today   [01:10PM  at Motley Fool]
▶ [$$] Avon Revenue Slides Amid Fewer Sales Reps   [07:53AM  at The Wall Street Journal]
▶ Avon Products profit falls short of estimates   [06:59AM  at MarketWatch]
Stock chart of AVP Financial statements of AVP Annual reports of AVP
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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