Intrinsic value of Coty Cl A - COTY

Previous Close

$16.65

  Intrinsic Value

$485.33

stock screener

  Rating & Target

str. buy

+999%

  Value-price divergence*

+2874%

Previous close

$16.65

 
Intrinsic value

$485.33

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence*

+2874%

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

We calculate the intrinsic value of COTY 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 2017), $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 12.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -12.61
  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
  7,650
  12,240
  18,911
  28,281
  41,034
  57,894
  79,590
  106,834
  140,279
  180,505
  227,993
  283,116
  346,136
  417,210
  496,398
  583,676
  678,955
  782,099
  892,942
  1,011,303
  1,137,005
  1,269,884
  1,409,800
  1,556,648
  1,710,361
  1,870,916
  2,038,333
  2,212,684
  2,394,085
  2,582,701
  2,778,743
Variable operating expenses, $m
 
  1,910
  2,485
  3,292
  4,391
  5,844
  7,713
  10,060
  12,942
  16,407
  20,499
  24,392
  29,822
  35,946
  42,768
  50,288
  58,497
  67,383
  76,933
  87,131
  97,961
  109,409
  121,464
  134,116
  147,359
  161,192
  175,616
  190,638
  206,267
  222,517
  239,408
Fixed operating expenses, $m
 
  6,902
  7,075
  7,252
  7,433
  7,619
  7,809
  8,005
  8,205
  8,410
  8,620
  8,836
  9,056
  9,283
  9,515
  9,753
  9,997
  10,247
  10,503
  10,765
  11,034
  11,310
  11,593
  11,883
  12,180
  12,484
  12,797
  13,116
  13,444
  13,781
  14,125
Total operating expenses, $m
  8,088
  8,812
  9,560
  10,544
  11,824
  13,463
  15,522
  18,065
  21,147
  24,817
  29,119
  33,228
  38,878
  45,229
  52,283
  60,041
  68,494
  77,630
  87,436
  97,896
  108,995
  120,719
  133,057
  145,999
  159,539
  173,676
  188,413
  203,754
  219,711
  236,298
  253,533
Operating income, $m
  -438
  3,427
  9,351
  17,737
  29,210
  44,431
  64,068
  88,769
  119,133
  155,688
  198,874
  249,888
  307,258
  371,982
  444,115
  523,635
  610,462
  704,470
  805,506
  913,407
  1,028,010
  1,149,164
  1,276,743
  1,410,649
  1,550,822
  1,697,239
  1,849,920
  2,008,930
  2,174,374
  2,346,403
  2,525,210
EBITDA, $m
  117
  4,764
  10,950
  19,704
  31,678
  47,562
  68,051
  93,822
  125,501
  163,636
  208,688
  261,012
  320,858
  388,375
  463,620
  546,569
  637,140
  735,200
  840,592
  953,144
  1,072,686
  1,199,061
  1,332,138
  1,471,814
  1,618,026
  1,770,752
  1,930,011
  2,095,871
  2,268,443
  2,447,884
  2,634,394
Interest expense (income), $m
  190
  242
  515
  913
  1,471
  2,230
  3,234
  4,525
  6,148
  8,139
  10,534
  13,361
  16,643
  20,396
  24,627
  29,342
  34,539
  40,212
  46,353
  52,953
  60,000
  67,484
  75,396
  83,726
  92,470
  101,622
  111,181
  121,149
  131,530
  142,331
  153,561
Earnings before tax, $m
  -658
  3,185
  8,836
  16,825
  27,740
  42,201
  60,835
  84,244
  112,985
  147,549
  188,340
  236,526
  290,614
  351,586
  419,487
  494,293
  575,923
  664,258
  759,153
  860,455
  968,010
  1,081,680
  1,201,347
  1,326,923
  1,458,352
  1,595,617
  1,738,739
  1,887,780
  2,042,843
  2,204,072
  2,371,649
Tax expense, $m
  -259
  860
  2,386
  4,543
  7,490
  11,394
  16,425
  22,746
  30,506
  39,838
  50,852
  63,862
  78,466
  94,928
  113,262
  133,459
  155,499
  179,350
  204,971
  232,323
  261,363
  292,054
  324,364
  358,269
  393,755
  430,817
  469,459
  509,701
  551,568
  595,099
  640,345
Net income, $m
  -422
  2,325
  6,450
  12,282
  20,250
  30,807
  44,409
  61,498
  82,479
  107,711
  137,488
  172,664
  212,148
  256,658
  306,226
  360,834
  420,424
  484,908
  554,182
  628,132
  706,647
  789,626
  876,983
  968,654
  1,064,597
  1,164,800
  1,269,279
  1,378,080
  1,491,276
  1,608,973
  1,731,304

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  535
  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
  22,548
  35,172
  54,341
  81,268
  117,915
  166,361
  228,708
  306,993
  403,102
  518,694
  655,153
  813,551
  994,644
  1,198,880
  1,426,431
  1,677,229
  1,951,021
  2,247,412
  2,565,925
  2,906,044
  3,267,256
  3,649,091
  4,051,150
  4,473,127
  4,914,831
  5,376,194
  5,857,279
  6,358,287
  6,879,555
  7,421,554
  7,984,893
Adjusted assets (=assets-cash), $m
  22,013
  35,172
  54,341
  81,268
  117,915
  166,361
  228,708
  306,993
  403,102
  518,694
  655,153
  813,551
  994,644
  1,198,880
  1,426,431
  1,677,229
  1,951,021
  2,247,412
  2,565,925
  2,906,044
  3,267,256
  3,649,091
  4,051,150
  4,473,127
  4,914,831
  5,376,194
  5,857,279
  6,358,287
  6,879,555
  7,421,554
  7,984,893
Revenue / Adjusted assets
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
  0.348
Average production assets, $m
  6,373
  10,196
  15,753
  23,558
  34,182
  48,225
  66,299
  88,992
  116,853
  150,361
  189,918
  235,835
  288,331
  347,536
  413,500
  486,202
  565,570
  651,489
  743,821
  842,416
  947,125
  1,057,813
  1,174,363
  1,296,688
  1,424,731
  1,558,473
  1,697,932
  1,843,166
  1,994,273
  2,151,390
  2,314,693
Working capital, $m
  -222
  -881
  -1,362
  -2,036
  -2,954
  -4,168
  -5,731
  -7,692
  -10,100
  -12,996
  -16,416
  -20,384
  -24,922
  -30,039
  -35,741
  -42,025
  -48,885
  -56,311
  -64,292
  -72,814
  -81,864
  -91,432
  -101,506
  -112,079
  -123,146
  -134,706
  -146,760
  -159,313
  -172,374
  -185,954
  -200,069
Total debt, $m
  7,137
  14,726
  26,074
  42,014
  63,710
  92,390
  129,299
  175,644
  232,540
  300,971
  381,754
  475,526
  582,733
  703,641
  838,351
  986,824
  1,148,908
  1,324,372
  1,512,932
  1,714,282
  1,928,120
  2,154,166
  2,392,185
  2,641,995
  2,903,484
  3,176,611
  3,461,413
  3,758,010
  4,066,600
  4,387,464
  4,720,961
Total liabilities, $m
  13,234
  20,822
  32,170
  48,110
  69,806
  98,486
  135,395
  181,740
  238,636
  307,067
  387,850
  481,622
  588,829
  709,737
  844,447
  992,920
  1,155,004
  1,330,468
  1,519,028
  1,720,378
  1,934,216
  2,160,262
  2,398,281
  2,648,091
  2,909,580
  3,182,707
  3,467,509
  3,764,106
  4,072,696
  4,393,560
  4,727,057
Total equity, $m
  9,315
  14,350
  22,171
  33,157
  48,109
  67,875
  93,313
  125,253
  164,465
  211,627
  267,302
  331,929
  405,815
  489,143
  581,984
  684,310
  796,016
  916,944
  1,046,898
  1,185,666
  1,333,041
  1,488,829
  1,652,869
  1,825,036
  2,005,251
  2,193,487
  2,389,770
  2,594,181
  2,806,858
  3,027,994
  3,257,836
Total liabilities and equity, $m
  22,549
  35,172
  54,341
  81,267
  117,915
  166,361
  228,708
  306,993
  403,101
  518,694
  655,152
  813,551
  994,644
  1,198,880
  1,426,431
  1,677,230
  1,951,020
  2,247,412
  2,565,926
  2,906,044
  3,267,257
  3,649,091
  4,051,150
  4,473,127
  4,914,831
  5,376,194
  5,857,279
  6,358,287
  6,879,554
  7,421,554
  7,984,893
Debt-to-equity ratio
  0.766
  1.030
  1.180
  1.270
  1.320
  1.360
  1.390
  1.400
  1.410
  1.420
  1.430
  1.430
  1.440
  1.440
  1.440
  1.440
  1.440
  1.440
  1.450
  1.450
  1.450
  1.450
  1.450
  1.450
  1.450
  1.450
  1.450
  1.450
  1.450
  1.450
  1.450
Adjusted equity ratio
  0.399
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408
  0.408

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -422
  2,325
  6,450
  12,282
  20,250
  30,807
  44,409
  61,498
  82,479
  107,711
  137,488
  172,664
  212,148
  256,658
  306,226
  360,834
  420,424
  484,908
  554,182
  628,132
  706,647
  789,626
  876,983
  968,654
  1,064,597
  1,164,800
  1,269,279
  1,378,080
  1,491,276
  1,608,973
  1,731,304
Depreciation, amort., depletion, $m
  555
  1,337
  1,599
  1,967
  2,468
  3,130
  3,983
  5,053
  6,368
  7,948
  9,814
  11,124
  13,601
  16,393
  19,505
  22,934
  26,678
  30,731
  35,086
  39,737
  44,676
  49,897
  55,395
  61,165
  67,204
  73,513
  80,091
  86,942
  94,069
  101,481
  109,184
Funds from operations, $m
  1,625
  3,662
  8,049
  14,249
  22,718
  33,937
  48,392
  66,551
  88,847
  115,659
  147,302
  183,789
  225,749
  273,051
  325,731
  383,768
  447,102
  515,639
  589,268
  667,869
  751,323
  839,523
  932,378
  1,029,818
  1,131,801
  1,238,313
  1,349,371
  1,465,021
  1,585,345
  1,710,453
  1,840,487
Change in working capital, $m
  867
  -330
  -480
  -675
  -918
  -1,214
  -1,562
  -1,962
  -2,408
  -2,896
  -3,419
  -3,969
  -4,537
  -5,117
  -5,702
  -6,284
  -6,860
  -7,426
  -7,981
  -8,522
  -9,051
  -9,567
  -10,074
  -10,573
  -11,067
  -11,560
  -12,054
  -12,553
  -13,061
  -13,580
  -14,115
Cash from operations, $m
  758
  3,992
  8,529
  14,923
  23,636
  35,151
  49,954
  68,513
  91,255
  118,555
  150,722
  187,757
  230,286
  278,169
  331,432
  390,052
  453,962
  523,065
  597,248
  676,391
  760,374
  849,091
  942,452
  1,040,391
  1,142,869
  1,249,873
  1,361,425
  1,477,575
  1,598,406
  1,724,034
  1,854,602
Maintenance CAPEX, $m
  0
  -301
  -481
  -743
  -1,111
  -1,612
  -2,275
  -3,127
  -4,198
  -5,512
  -7,093
  -8,958
  -11,124
  -13,601
  -16,393
  -19,505
  -22,934
  -26,678
  -30,731
  -35,086
  -39,737
  -44,676
  -49,897
  -55,395
  -61,165
  -67,204
  -73,513
  -80,091
  -86,942
  -94,069
  -101,481
New CAPEX, $m
  -432
  -3,823
  -5,557
  -7,805
  -10,624
  -14,044
  -18,073
  -22,694
  -27,860
  -33,508
  -39,557
  -45,917
  -52,496
  -59,205
  -65,963
  -72,702
  -79,368
  -85,919
  -92,332
  -98,595
  -104,710
  -110,688
  -116,550
  -122,325
  -128,043
  -133,742
  -139,459
  -145,234
  -151,107
  -157,117
  -163,303
Cash from investing activities, $m
  -1,164
  -4,124
  -6,038
  -8,548
  -11,735
  -15,656
  -20,348
  -25,821
  -32,058
  -39,020
  -46,650
  -54,875
  -63,620
  -72,806
  -82,356
  -92,207
  -102,302
  -112,597
  -123,063
  -133,681
  -144,447
  -155,364
  -166,447
  -177,720
  -189,208
  -200,946
  -212,972
  -225,325
  -238,049
  -251,186
  -264,784
Free cash flow, $m
  -406
  -131
  2,491
  6,375
  11,902
  19,495
  29,606
  42,692
  59,197
  79,535
  104,072
  132,882
  166,666
  205,363
  249,076
  297,845
  351,660
  410,468
  474,186
  542,710
  615,927
  693,727
  776,005
  862,672
  953,661
  1,048,927
  1,148,453
  1,252,249
  1,360,357
  1,472,847
  1,589,819
Issuance/(repayment) of debt, $m
  1,059
  7,798
  11,348
  15,940
  21,695
  28,680
  36,909
  46,345
  56,896
  68,431
  80,784
  93,772
  107,207
  120,908
  134,710
  148,473
  162,084
  175,464
  188,560
  201,350
  213,838
  226,046
  238,019
  249,811
  261,489
  273,127
  284,803
  296,597
  308,590
  320,864
  333,496
Issuance/(repurchase) of shares, $m
  -14
  3,036
  1,371
  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  
  968
  10,834
  12,719
  15,940
  21,695
  28,680
  36,909
  46,345
  56,896
  68,431
  80,784
  93,772
  107,207
  120,908
  134,710
  148,473
  162,084
  175,464
  188,560
  201,350
  213,838
  226,046
  238,019
  249,811
  261,489
  273,127
  284,803
  296,597
  308,590
  320,864
  333,496
Total cash flow (excl. dividends), $m
  571
  10,703
  15,210
  22,315
  33,597
  48,175
  66,516
  89,037
  116,093
  147,966
  184,855
  226,654
  273,873
  326,271
  383,786
  446,318
  513,744
  585,932
  662,746
  744,060
  829,765
  919,773
  1,014,023
  1,112,483
  1,215,150
  1,322,054
  1,433,255
  1,548,846
  1,668,947
  1,793,711
  1,923,315
Retained Cash Flow (-), $m
  -8,955
  -5,361
  -7,821
  -10,986
  -14,952
  -19,766
  -25,438
  -31,940
  -39,212
  -47,162
  -55,675
  -64,627
  -73,886
  -83,328
  -92,841
  -102,326
  -111,707
  -120,928
  -129,953
  -138,768
  -147,375
  -155,789
  -164,040
  -172,167
  -180,215
  -188,236
  -196,283
  -204,411
  -212,677
  -221,136
  -229,842
Prev. year cash balance distribution, $m
 
  326
  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
 
  5,668
  7,389
  11,329
  18,645
  28,409
  41,078
  57,096
  76,881
  100,804
  129,180
  162,027
  199,987
  242,943
  290,945
  343,992
  402,038
  465,004
  532,792
  605,292
  682,390
  763,985
  849,984
  940,316
  1,034,935
  1,133,818
  1,236,972
  1,344,435
  1,456,270
  1,572,575
  1,693,473
Discount rate, %
 
  8.90
  9.35
  9.81
  10.30
  10.82
  11.36
  11.93
  12.52
  13.15
  13.81
  14.50
  15.22
  15.98
  16.78
  17.62
  18.50
  19.43
  20.40
  21.42
  22.49
  23.61
  24.80
  26.03
  27.34
  28.70
  30.14
  31.65
  33.23
  34.89
  36.63
PV of cash for distribution, $m
 
  5,204
  6,180
  8,556
  12,595
  16,998
  21,541
  25,946
  29,915
  33,160
  35,442
  36,546
  36,524
  35,349
  33,154
  30,148
  26,585
  22,734
  18,852
  15,154
  11,804
  8,905
  6,502
  4,592
  3,134
  2,064
  1,312
  803
  473
  267
  145
Current shareholders' claim on cash, %
  100
  80.0
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7
  74.7

Coty Inc. is a beauty company. The Company operates through four segments: Fragrances, Color Cosmetics, Skin & Body Care and Brazil Acquisition. Its fragrance products include a range of men's and women's products. Its fragrance brands include Calvin Klein, Marc Jacobs, Davidoff, Chloe, Balenciaga, Beyonce, Bottega Veneta, Miu Miu and Roberto Cavalli. Its color cosmetics products include lip, eye, nail and facial color products. The brands in its Color Cosmetics segment include Bourjois, Rimmel, Sally Hansen and OPI. Its skin & body care products include shower gels, deodorants, skin care and sun treatment products. Its skin & body care brands are adidas, Lancaster, philosophy and Playboy. The Company, through Hypermarcas S.A., engages in personal care and beauty business. The Brazil Acquisition segment includes product groupings, such as skin care, nail care, deodorants and hair care products. It operates in the Americas; Europe, the Middle East and Africa (EMEA), and Asia Pacific.

FINANCIAL RATIOS  of  Coty Cl A (COTY)

Valuation Ratios
P/E Ratio -29.5
Price to Sales 1.6
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 16.4
Price to Free Cash Flow 38.2
Growth Rates
Sales Growth Rate -12.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 188%
Cap. Spend. - 3 Yr. Gr. Rate 13.2%
Financial Strength
Quick Ratio 3
Current Ratio 0
LT Debt to Equity 74.4%
Total Debt to Equity 76.6%
Interest Coverage -2
Management Effectiveness
Return On Assets -2.1%
Ret/ On Assets - 3 Yr. Avg. 2.4%
Return On Total Capital -4%
Ret/ On T. Cap. - 3 Yr. Avg. 2.4%
Return On Equity -8.7%
Return On Equity - 3 Yr. Avg. 16.4%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 60.4%
Gross Margin - 3 Yr. Avg. 61.2%
EBITDA Margin 1.1%
EBITDA Margin - 3 Yr. Avg. 6.7%
Operating Margin -5.7%
Oper. Margin - 3 Yr. Avg. 2.1%
Pre-Tax Margin -8.6%
Pre-Tax Margin - 3 Yr. Avg. -0%
Net Profit Margin -5.5%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate 39.4%
Eff/ Tax Rate - 3 Yr. Avg. 14.3%
Payout Ratio -88.4%

COTY stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the COTY stock intrinsic value calculation we used $7650 million for the last fiscal year's total revenue generated by Coty Cl A. The default revenue input number comes from 2017 income statement of Coty Cl A. 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 COTY 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 8.9%, whose default value for COTY is calculated based on our internal credit rating of Coty Cl A, 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 Coty Cl A.
    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 COTY stock the variable cost ratio is equal to 19.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6734 million in the base year in the intrinsic value calculation for COTY 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 3.5% for Coty Cl A.

Corporate tax rate of 27% is the nominal tax rate for Coty Cl A. 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 COTY 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 COTY are equal to 83.3%.

Life of production assets of 21.2 years is the average useful life of capital assets used in Coty Cl A 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 COTY is equal to -7.2%. 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 - $9315 million for Coty Cl A - 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 756.098 million for Coty Cl A 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 Coty Cl A at the current share price and the inputted number of shares is $12.6 billion.

RELATED COMPANIES Price Int.Val. Rating
AVP Avon Products 2.50 0.33  str.sell
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REV Revlon Cl A 18.05 54.10  str.buy
IPAR Inter Parfums 40.65 34.40  hold
UL Unilever ADR 58.55 33.44  sell
UN Unilever ADR 59.90 33.52  sell

COMPANY NEWS

▶ Weekly Top Insider Buys Highlights   [Sep-08-17 10:47PM  GuruFocus.com]
▶ Why Coty Inc. Stock Dove 19% in August   [Sep-07-17 07:08PM  Motley Fool]
▶ ETFs with exposure to Coty, Inc. : August 31, 2017   [Aug-31-17 05:50PM  Capital Cube]
▶ Turnaround, Meet Headwinds: Coty Shares Downgraded   [Aug-30-17 03:32PM  Benzinga]
▶ 2 Stocks Fall on Earnings Report   [Aug-29-17 03:26PM  GuruFocus.com]
▶ Company News For August 23, 2017   [10:25AM  Zacks]
▶ Coty reports 4Q loss   [Aug-22-17 10:06PM  Associated Press]
▶ Coty plunges after big earnings miss   [06:08PM  Investing.com]
▶ [$$] Coty's Beauty Sales Slump   [02:48PM  The Wall Street Journal]
▶ 3 Bear Stocks for Today   [01:46PM  GuruFocus.com]
▶ Coty's Beauty Is on the Inside   [10:39AM  Bloomberg]
▶ Coty shares fall after earnings miss   [07:20AM  MarketWatch]
▶ Here's how Avon Products can get back on track   [Aug-04-17 01:25PM  American City Business Journals]
▶ How Avons CEO Failed to Fix the Company   [Aug-03-17 02:41PM  Fortune]
▶ Avon: More Downside Ahead?   [12:30PM  Barrons.com]
▶ Why Is Avon Getting Crushed?   [09:44AM  Barrons.com]
▶ Coty, Inc. Value Analysis (NYSE:COTY) : July 4, 2017   [Jul-04-17 03:55PM  Capital Cube]
▶ Weekly Top Insider Buys Highlight for the Week of June 23   [Jun-24-17 06:40PM  GuruFocus.com]
▶ Ralph Macchio Coty Chief Scientific Officer to Retire   [Jun-13-17 10:30AM  Business Wire]
▶ ETFs with exposure to Coty, Inc. : June 9, 2017   [Jun-09-17 01:23PM  Capital Cube]
▶ Bet on beauty stocks?   [May-26-17 05:21PM  CNBC Videos]
▶ [$$] Ralph Lauren hires new chief executive from P&G   [May-17-17 01:52PM  Financial Times]
▶ The Trick to Selling Beauty Products Online   [12:52PM  The Wall Street Journal]
▶ ETFs with exposure to Coty, Inc. : May 16, 2017   [May-16-17 12:49PM  Capital Cube]
▶ Consumer Cos. Soar on Positive Earnings Surprise   [May-10-17 06:29PM  Investopedia]
▶ Why Shares of Coty Inc. Jumped Today   [01:24PM  Motley Fool]
▶ Coty reports 3Q loss   [06:36AM  Associated Press]
▶ Coty Inc. Declares Quarterly Dividend   [06:30AM  Business Wire]
▶ Coty, Inc. Value Analysis (NYSE:COTY) : May 8, 2017   [May-08-17 05:47PM  Capital Cube]
▶ Is Coty an Opportunity for Value Investors?   [May-02-17 11:03AM  Investopedia]
▶ Coty Appoints Sabine Chalmers to Its Board of Directors   [Apr-18-17 09:00AM  Business Wire]
▶ Top 4 Cosmetics Stocks of 2017   [Apr-13-17 11:44AM  Investopedia]
Financial statements of COTY
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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