Intrinsic value of Coty Cl A - COTY

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$19.14

  Intrinsic Value

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  Value-price divergence*

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$19.14

 
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*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 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 14.3

 

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, %
  99.18
  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
  8,754
  14,006
  21,640
  32,362
  46,956
  66,249
  91,076
  122,251
  160,524
  206,555
  260,896
  323,973
  396,088
  477,420
  568,035
  667,908
  776,938
  894,967
  1,021,806
  1,157,248
  1,301,091
  1,453,145
  1,613,254
  1,781,294
  1,957,190
  2,140,914
  2,332,493
  2,532,005
  2,739,584
  2,955,420
  3,179,753
Variable operating expenses, $m
 
  12,893
  19,799
  29,500
  42,704
  60,158
  82,620
  110,824
  145,450
  187,096
  236,259
  293,105
  358,349
  431,931
  513,913
  604,270
  702,911
  809,695
  924,448
  1,046,986
  1,177,123
  1,314,690
  1,459,543
  1,611,572
  1,770,709
  1,936,928
  2,110,253
  2,290,756
  2,478,557
  2,673,828
  2,876,787
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
  8,307
  12,893
  19,799
  29,500
  42,704
  60,158
  82,620
  110,824
  145,450
  187,096
  236,259
  293,105
  358,349
  431,931
  513,913
  604,270
  702,911
  809,695
  924,448
  1,046,986
  1,177,123
  1,314,690
  1,459,543
  1,611,572
  1,770,709
  1,936,928
  2,110,253
  2,290,756
  2,478,557
  2,673,828
  2,876,787
Operating income, $m
  447
  1,113
  1,841
  2,862
  4,253
  6,091
  8,456
  11,427
  15,073
  19,459
  24,637
  30,868
  37,739
  45,488
  54,122
  63,638
  74,027
  85,272
  97,358
  110,262
  123,968
  138,456
  153,711
  169,721
  186,481
  203,986
  222,240
  241,249
  261,027
  281,592
  302,966
EBITDA, $m
  679
  1,548
  2,392
  3,577
  5,189
  7,321
  10,065
  13,511
  17,740
  22,828
  28,833
  35,804
  43,774
  52,762
  62,777
  73,814
  85,864
  98,908
  112,925
  127,894
  143,791
  160,595
  178,289
  196,861
  216,300
  236,604
  257,777
  279,826
  302,766
  326,620
  351,412
Interest expense (income), $m
  90
  138
  246
  429
  686
  1,035
  1,498
  2,093
  2,840
  3,758
  4,861
  6,164
  7,676
  9,405
  11,355
  13,527
  15,921
  18,535
  21,364
  24,405
  27,652
  31,100
  34,745
  38,584
  42,612
  46,829
  51,233
  55,826
  60,609
  65,585
  70,759
Earnings before tax, $m
  278
  975
  1,595
  2,434
  3,567
  5,055
  6,959
  9,334
  12,233
  15,701
  19,775
  24,704
  30,063
  36,083
  42,768
  50,111
  58,105
  66,737
  75,993
  85,857
  96,316
  107,355
  118,965
  131,138
  143,869
  157,157
  171,007
  185,423
  200,419
  216,007
  232,208
Tax expense, $m
  41
  263
  431
  657
  963
  1,365
  1,879
  2,520
  3,303
  4,239
  5,339
  6,670
  8,117
  9,743
  11,547
  13,530
  15,688
  18,019
  20,518
  23,181
  26,005
  28,986
  32,121
  35,407
  38,845
  42,432
  46,172
  50,064
  54,113
  58,322
  62,696
Net income, $m
  215
  712
  1,164
  1,777
  2,604
  3,690
  5,080
  6,814
  8,930
  11,462
  14,436
  18,034
  21,946
  26,341
  31,220
  36,581
  42,417
  48,718
  55,475
  62,676
  70,310
  78,369
  86,845
  95,731
  105,024
  114,725
  124,835
  135,359
  146,306
  157,685
  169,512

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  372
  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
  7,036
  10,659
  16,469
  24,629
  35,735
  50,417
  69,312
  93,037
  122,164
  157,196
  198,551
  246,555
  301,437
  363,333
  432,295
  508,302
  591,277
  681,101
  777,630
  880,706
  990,175
  1,105,894
  1,227,742
  1,355,627
  1,489,490
  1,629,311
  1,775,109
  1,926,944
  2,084,920
  2,249,178
  2,419,904
Adjusted assets (=assets-cash), $m
  6,664
  10,659
  16,469
  24,629
  35,735
  50,417
  69,312
  93,037
  122,164
  157,196
  198,551
  246,555
  301,437
  363,333
  432,295
  508,302
  591,277
  681,101
  777,630
  880,706
  990,175
  1,105,894
  1,227,742
  1,355,627
  1,489,490
  1,629,311
  1,775,109
  1,926,944
  2,084,920
  2,249,178
  2,419,904
Revenue / Adjusted assets
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
  1.314
Average production assets, $m
  2,552
  4,076
  6,297
  9,417
  13,664
  19,278
  26,503
  35,575
  46,712
  60,107
  75,921
  94,276
  115,262
  138,929
  165,298
  194,361
  226,089
  260,435
  297,345
  336,759
  378,617
  422,865
  469,457
  518,357
  569,542
  623,006
  678,755
  736,813
  797,219
  860,027
  925,308
Working capital, $m
  83
  -210
  -325
  -485
  -704
  -994
  -1,366
  -1,834
  -2,408
  -3,098
  -3,913
  -4,860
  -5,941
  -7,161
  -8,521
  -10,019
  -11,654
  -13,425
  -15,327
  -17,359
  -19,516
  -21,797
  -24,199
  -26,719
  -29,358
  -32,114
  -34,987
  -37,980
  -41,094
  -44,331
  -47,696
Total debt, $m
  4,098
  7,015
  12,244
  19,588
  29,584
  42,798
  59,803
  81,156
  107,370
  138,898
  176,118
  219,321
  268,715
  324,422
  386,487
  454,893
  529,571
  610,413
  697,289
  790,058
  888,580
  992,727
  1,102,390
  1,217,486
  1,337,963
  1,463,802
  1,595,020
  1,731,672
  1,873,850
  2,021,682
  2,175,335
Total liabilities, $m
  6,675
  9,593
  14,822
  22,166
  32,162
  45,376
  62,381
  83,734
  109,948
  141,476
  178,696
  221,899
  271,293
  327,000
  389,065
  457,471
  532,149
  612,991
  699,867
  792,636
  891,158
  995,305
  1,104,968
  1,220,064
  1,340,541
  1,466,380
  1,597,598
  1,734,250
  1,876,428
  2,024,260
  2,177,913
Total equity, $m
  360
  1,066
  1,647
  2,463
  3,574
  5,042
  6,931
  9,304
  12,216
  15,720
  19,855
  24,655
  30,144
  36,333
  43,229
  50,830
  59,128
  68,110
  77,763
  88,071
  99,018
  110,589
  122,774
  135,563
  148,949
  162,931
  177,511
  192,694
  208,492
  224,918
  241,990
Total liabilities and equity, $m
  7,035
  10,659
  16,469
  24,629
  35,736
  50,418
  69,312
  93,038
  122,164
  157,196
  198,551
  246,554
  301,437
  363,333
  432,294
  508,301
  591,277
  681,101
  777,630
  880,707
  990,176
  1,105,894
  1,227,742
  1,355,627
  1,489,490
  1,629,311
  1,775,109
  1,926,944
  2,084,920
  2,249,178
  2,419,903
Debt-to-equity ratio
  11.383
  6.580
  7.430
  7.950
  8.280
  8.490
  8.630
  8.720
  8.790
  8.840
  8.870
  8.900
  8.910
  8.930
  8.940
  8.950
  8.960
  8.960
  8.970
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.980
  8.990
  8.990
  8.990
  8.990
  8.990
Adjusted equity ratio
  0.001
  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
  215
  712
  1,164
  1,777
  2,604
  3,690
  5,080
  6,814
  8,930
  11,462
  14,436
  18,034
  21,946
  26,341
  31,220
  36,581
  42,417
  48,718
  55,475
  62,676
  70,310
  78,369
  86,845
  95,731
  105,024
  114,725
  124,835
  135,359
  146,306
  157,685
  169,512
Depreciation, amort., depletion, $m
  232
  435
  551
  714
  937
  1,231
  1,609
  2,084
  2,667
  3,368
  4,196
  4,936
  6,035
  7,274
  8,654
  10,176
  11,837
  13,635
  15,568
  17,631
  19,823
  22,140
  24,579
  27,139
  29,819
  32,618
  35,537
  38,577
  41,739
  45,028
  48,445
Funds from operations, $m
  681
  1,147
  1,715
  2,491
  3,541
  4,921
  6,689
  8,897
  11,597
  14,830
  18,632
  22,970
  27,981
  33,615
  39,875
  46,757
  54,254
  62,354
  71,043
  80,307
  90,133
  100,509
  111,423
  122,870
  134,843
  147,343
  160,372
  173,936
  188,045
  202,713
  217,957
Change in working capital, $m
  180
  -79
  -115
  -161
  -219
  -289
  -372
  -468
  -574
  -690
  -815
  -946
  -1,082
  -1,220
  -1,359
  -1,498
  -1,635
  -1,770
  -1,903
  -2,032
  -2,158
  -2,281
  -2,402
  -2,521
  -2,638
  -2,756
  -2,874
  -2,993
  -3,114
  -3,238
  -3,365
Cash from operations, $m
  501
  1,362
  1,830
  2,652
  3,760
  5,210
  7,061
  9,365
  12,171
  15,521
  19,447
  23,916
  29,062
  34,835
  41,234
  48,255
  55,889
  64,124
  72,945
  82,339
  92,291
  102,790
  113,825
  125,390
  137,482
  150,099
  163,245
  176,928
  191,159
  205,950
  221,322
Maintenance CAPEX, $m
  0
  -134
  -213
  -330
  -493
  -715
  -1,009
  -1,388
  -1,863
  -2,446
  -3,147
  -3,975
  -4,936
  -6,035
  -7,274
  -8,654
  -10,176
  -11,837
  -13,635
  -15,568
  -17,631
  -19,823
  -22,140
  -24,579
  -27,139
  -29,819
  -32,618
  -35,537
  -38,577
  -41,739
  -45,028
New CAPEX, $m
  -150
  -1,524
  -2,221
  -3,120
  -4,247
  -5,614
  -7,225
  -9,072
  -11,137
  -13,395
  -15,813
  -18,356
  -20,985
  -23,667
  -26,369
  -29,063
  -31,728
  -34,347
  -36,910
  -39,414
  -41,858
  -44,248
  -46,591
  -48,900
  -51,186
  -53,464
  -55,749
  -58,058
  -60,406
  -62,808
  -65,281
Cash from investing activities, $m
  -1,059
  -1,658
  -2,434
  -3,450
  -4,740
  -6,329
  -8,234
  -10,460
  -13,000
  -15,841
  -18,960
  -22,331
  -25,921
  -29,702
  -33,643
  -37,717
  -41,904
  -46,184
  -50,545
  -54,982
  -59,489
  -64,071
  -68,731
  -73,479
  -78,325
  -83,283
  -88,367
  -93,595
  -98,983
  -104,547
  -110,309
Free cash flow, $m
  -558
  -296
  -605
  -798
  -980
  -1,119
  -1,173
  -1,094
  -829
  -320
  487
  1,586
  3,141
  5,133
  7,591
  10,538
  13,986
  17,940
  22,400
  27,357
  32,802
  38,719
  45,094
  51,912
  59,157
  66,816
  74,878
  83,333
  92,176
  101,403
  111,013
Issuance/(repayment) of debt, $m
  1,533
  3,079
  5,228
  7,344
  9,996
  13,214
  17,005
  21,353
  26,214
  31,528
  37,220
  43,204
  49,394
  55,706
  62,065
  68,406
  74,678
  80,842
  86,876
  92,769
  98,522
  104,147
  109,663
  115,096
  120,477
  125,839
  131,218
  136,652
  142,178
  147,833
  153,653
Issuance/(repurchase) of shares, $m
  -750
  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 from financing (excl. dividends), $m  
  682
  3,079
  5,228
  7,344
  9,996
  13,214
  17,005
  21,353
  26,214
  31,528
  37,220
  43,204
  49,394
  55,706
  62,065
  68,406
  74,678
  80,842
  86,876
  92,769
  98,522
  104,147
  109,663
  115,096
  120,477
  125,839
  131,218
  136,652
  142,178
  147,833
  153,653
Total cash flow (excl. dividends), $m
  120
  2,784
  4,624
  6,546
  9,016
  12,095
  15,832
  20,258
  25,385
  31,208
  37,707
  44,789
  52,535
  60,839
  69,656
  78,944
  88,664
  98,782
  109,276
  120,126
  131,324
  142,866
  154,757
  167,008
  179,633
  192,655
  206,096
  219,985
  234,354
  249,236
  264,666
Retained Cash Flow (-), $m
  610
  -916
  -581
  -816
  -1,111
  -1,468
  -1,889
  -2,373
  -2,913
  -3,503
  -4,136
  -4,800
  -5,488
  -6,190
  -6,896
  -7,601
  -8,298
  -8,982
  -9,653
  -10,308
  -10,947
  -11,572
  -12,185
  -12,788
  -13,386
  -13,982
  -14,580
  -15,184
  -15,798
  -16,426
  -17,073
Prev. year cash balance distribution, $m
 
  210
  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
 
  2,078
  4,043
  5,730
  7,905
  10,627
  13,943
  17,886
  22,473
  27,705
  33,571
  39,989
  47,047
  54,649
  62,760
  71,343
  80,366
  89,800
  99,623
  109,818
  120,377
  131,294
  142,572
  154,219
  166,247
  178,673
  191,516
  204,802
  218,557
  232,810
  247,594
Discount rate, %
 
  12.70
  13.34
  14.00
  14.70
  15.44
  16.21
  17.02
  17.87
  18.76
  19.70
  20.69
  21.72
  22.81
  23.95
  25.15
  26.40
  27.72
  29.11
  30.56
  32.09
  33.70
  35.38
  37.15
  39.01
  40.96
  43.01
  45.16
  47.41
  49.79
  52.27
PV of cash for distribution, $m
 
  1,843
  3,147
  3,867
  4,567
  5,184
  5,661
  5,953
  6,031
  5,894
  5,559
  5,054
  4,448
  3,782
  3,107
  2,467
  1,892
  1,402
  1,003
  692
  460
  295
  182
  108
  61
  33
  17
  9
  4
  2
  1
Current shareholders' claim on cash, %
  100
  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
  100.0

Coty Inc., together with its subsidiaries, manufactures, markets, and distributes beauty products worldwide. The company operates through four segments: Fragrances, Color Cosmetics, Skin & Body Care, and Brazil Acquisition. It offers fragrances under the Calvin Klein, Marc Jacobs, Davidoff, Chloé, Balenciaga, Beyoncé, Bottega Veneta, Guess?, Katy Perry, Miu Miu, and Roberto Cavalli brand names. The company also provides lip, eye, nail, and facial color products under the Bourjois, Rimmel, Sally Hansen, and OPI brands. In addition, it offers shower gels, deodorants, skin care, and sun treatment products under the adidas, Lancaster, philosophy, and Playboy brand names; and hair straighteners, hair dryers, curlers, and hair brushes; and spray, serum, cream, and foam product lines to curl, fix, protect, shine, straighten, and volumize hair. The company also markets its products under the Astor, Coty, Joop!, Jovan, Manhattan, and N.Y.C. New York Color brands. It sells its products through retailers, including hypermarkets, supermarkets, independent and chain drug stores and pharmacies, upscale perfumeries, upscale and mid-tier department stores, nail salons, specialty retailers, duty-free shops and traditional food, and drug and mass retailers. Coty Inc. was founded in 1904 and is headquartered in New York, New York.

FINANCIAL RATIOS  of  Coty Cl A (COTY)

Valuation Ratios
P/E Ratio 30
Price to Sales 0.7
Price to Book 17.9
Price to Tangible Book
Price to Cash Flow 12.9
Price to Free Cash Flow 18.4
Growth Rates
Sales Growth Rate 99.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -25.4%
Cap. Spend. - 3 Yr. Gr. Rate -7.7%
Financial Strength
Quick Ratio 2
Current Ratio 0.1
LT Debt to Equity 1093.3%
Total Debt to Equity 1138.3%
Interest Coverage 4
Management Effectiveness
Return On Assets 4.5%
Ret/ On Assets - 3 Yr. Avg. 3.1%
Return On Total Capital 5.3%
Ret/ On T. Cap. - 3 Yr. Avg. 3%
Return On Equity 32.3%
Return On Equity - 3 Yr. Avg. 16.6%
Asset Turnover 1.3
Profitability Ratios
Gross Margin 63.3%
Gross Margin - 3 Yr. Avg. 60.8%
EBITDA Margin 6.9%
EBITDA Margin - 3 Yr. Avg. 8.3%
Operating Margin 5.1%
Oper. Margin - 3 Yr. Avg. 4.2%
Pre-Tax Margin 3.2%
Pre-Tax Margin - 3 Yr. Avg. 2.5%
Net Profit Margin 2.5%
Net Profit Margin - 3 Yr. Avg. 1.9%
Effective Tax Rate 14.7%
Eff/ Tax Rate - 3 Yr. Avg. -14%
Payout Ratio 41.4%

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 $8754 million for the last fiscal year's total revenue generated by Coty Cl A. The default revenue input number comes from 2016 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 12.7%, 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 93%.

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 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 29.1%.

Life of production assets of 19.1 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 -1.5%. 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 - $360 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 748.064 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 $14.3 billion.


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COMPANY NEWS

▶ 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]
▶ [$$] Ralph Lauren hires new chief executive from P&G   [May-17-17 01:52PM  Financial Times]
▶ The Trick to Selling Beauty Products Online   [12:52PM  The Wall Street Journal]
▶ ETFs with exposure to Coty, Inc. : May 16, 2017   [May-16-17 12:49PM  Capital Cube]
▶ Consumer Cos. Soar on Positive Earnings Surprise   [May-10-17 06:29PM  Investopedia]
▶ Why Shares of Coty Inc. Jumped Today   [01:24PM  Motley Fool]
▶ Coty reports 3Q loss   [06:36AM  Associated Press]
▶ Coty Inc. Declares Quarterly Dividend   [06:30AM  Business Wire]
▶ Coty, Inc. Value Analysis (NYSE:COTY) : May 8, 2017   [May-08-17 05:47PM  Capital Cube]
▶ Is Coty an Opportunity for Value Investors?   [May-02-17 11:03AM  Investopedia]
▶ Coty Appoints Sabine Chalmers to Its Board of Directors   [Apr-18-17 09:00AM  Business Wire]
▶ Top 4 Cosmetics Stocks of 2017   [Apr-13-17 11:44AM  Investopedia]
▶ Coty, DryShips Sink into Mondays 52-Week Low Club   [Apr-10-17 04:05PM  24/7 Wall St.]
▶ [$$] Burberry licenses make-up and fragrances to Coty   [Apr-03-17 11:00AM  at Financial Times]
▶ Coty Buys Rights to Burberrys Luxury Lines   [09:21AM  Investopedia]
▶ EU Court to Rule on Luxury Brands Online Ban   [Mar-31-17 10:02AM  Investopedia]
▶ Weekly Top Insider Buys Highlight for the Week of March 17   [Mar-19-17 11:13AM  GuruFocus.com]
▶ The Hot Stock: Flir Systems Gains 8.1%   [04:27PM  at Barrons.com]
▶ [$$] Peltz puts pressure on P&G with $3bn-plus stake   [Feb-14-17 07:07PM  at Financial Times]
▶ [$$] Coty Earnings Fall   [Feb-09-17 01:44PM  at The Wall Street Journal]
▶ Coty Inc. Declares Quarterly Dividend   [06:30AM  Business Wire]
▶ [$$] Made-up men reflect changing $50bn male grooming industry   [Feb-04-17 12:04AM  at Financial Times]
Stock chart of COTY Financial statements of COTY Annual reports 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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