Intrinsic value of Avon Products, Inc. - AVP

Previous Close

$4.16

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$4.16

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

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 0001), $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 1.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  5,682
  5,813
  5,963
  6,130
  6,316
  6,520
  6,742
  6,982
  7,241
  7,519
  7,817
  8,134
  8,472
  8,831
  9,211
  9,615
  10,042
  10,494
  10,972
  11,476
  12,008
  12,569
  13,160
  13,783
  14,439
  15,130
  15,857
  16,623
  17,428
  18,274
Variable operating expenses, $m
  4,938
  5,051
  5,181
  5,326
  5,488
  5,664
  5,857
  6,066
  6,290
  6,531
  6,780
  7,056
  7,349
  7,660
  7,990
  8,341
  8,711
  9,103
  9,517
  9,955
  10,416
  10,903
  11,416
  11,956
  12,525
  13,125
  13,755
  14,419
  15,117
  15,852
Fixed operating expenses, $m
  522
  534
  545
  557
  570
  582
  595
  608
  622
  635
  649
  663
  678
  693
  708
  724
  740
  756
  773
  790
  807
  825
  843
  861
  880
  900
  920
  940
  960
  982
Total operating expenses, $m
  5,460
  5,585
  5,726
  5,883
  6,058
  6,246
  6,452
  6,674
  6,912
  7,166
  7,429
  7,719
  8,027
  8,353
  8,698
  9,065
  9,451
  9,859
  10,290
  10,745
  11,223
  11,728
  12,259
  12,817
  13,405
  14,025
  14,675
  15,359
  16,077
  16,834
Operating income, $m
  222
  228
  236
  246
  259
  273
  290
  309
  330
  353
  387
  415
  445
  478
  513
  551
  591
  635
  682
  732
  785
  841
  902
  966
  1,034
  1,106
  1,182
  1,264
  1,350
  1,441
EBITDA, $m
  334
  342
  353
  366
  382
  400
  420
  444
  469
  497
  528
  562
  598
  637
  679
  724
  773
  825
  880
  939
  1,002
  1,068
  1,139
  1,215
  1,294
  1,379
  1,469
  1,564
  1,664
  1,771
Interest expense (income), $m
  87
  123
  34
  39
  45
  51
  58
  65
  74
  83
  92
  103
  114
  126
  138
  152
  166
  181
  197
  214
  232
  251
  271
  292
  314
  337
  362
  388
  415
  444
  474
Earnings before tax, $m
  100
  194
  197
  202
  208
  216
  225
  235
  247
  260
  284
  301
  319
  339
  361
  385
  410
  438
  468
  500
  534
  571
  610
  652
  696
  744
  795
  849
  906
  967
Tax expense, $m
  27
  52
  53
  55
  56
  58
  61
  63
  67
  70
  77
  81
  86
  92
  97
  104
  111
  118
  126
  135
  144
  154
  165
  176
  188
  201
  215
  229
  245
  261
Net income, $m
  73
  142
  144
  147
  152
  157
  164
  172
  180
  190
  207
  220
  233
  248
  263
  281
  299
  320
  341
  365
  390
  416
  445
  476
  508
  543
  580
  620
  661
  706

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  3,070
  3,141
  3,221
  3,312
  3,412
  3,522
  3,642
  3,772
  3,912
  4,062
  4,223
  4,394
  4,577
  4,771
  4,976
  5,195
  5,425
  5,670
  5,928
  6,200
  6,487
  6,790
  7,110
  7,446
  7,801
  8,174
  8,567
  8,980
  9,415
  9,873
Adjusted assets (=assets-cash), $m
  3,070
  3,141
  3,221
  3,312
  3,412
  3,522
  3,642
  3,772
  3,912
  4,062
  4,223
  4,394
  4,577
  4,771
  4,976
  5,195
  5,425
  5,670
  5,928
  6,200
  6,487
  6,790
  7,110
  7,446
  7,801
  8,174
  8,567
  8,980
  9,415
  9,873
Revenue / Adjusted assets
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
  1.851
Average production assets, $m
  688
  703
  721
  742
  764
  789
  816
  845
  876
  910
  946
  984
  1,025
  1,068
  1,115
  1,163
  1,215
  1,270
  1,328
  1,389
  1,453
  1,521
  1,592
  1,668
  1,747
  1,831
  1,919
  2,011
  2,109
  2,211
Working capital, $m
  -261
  -267
  -274
  -282
  -291
  -300
  -310
  -321
  -333
  -346
  -360
  -374
  -390
  -406
  -424
  -442
  -462
  -483
  -505
  -528
  -552
  -578
  -605
  -634
  -664
  -696
  -729
  -765
  -802
  -841
Total debt, $m
  442
  506
  578
  660
  750
  849
  957
  1,074
  1,200
  1,335
  1,480
  1,634
  1,798
  1,973
  2,158
  2,354
  2,562
  2,782
  3,014
  3,259
  3,518
  3,790
  4,078
  4,381
  4,700
  5,036
  5,389
  5,761
  6,153
  6,565
Total liabilities, $m
  2,763
  2,826
  2,899
  2,981
  3,071
  3,170
  3,278
  3,395
  3,521
  3,656
  3,801
  3,955
  4,119
  4,294
  4,479
  4,675
  4,883
  5,103
  5,335
  5,580
  5,839
  6,111
  6,399
  6,702
  7,021
  7,357
  7,710
  8,082
  8,474
  8,885
Total equity, $m
  307
  314
  322
  331
  341
  352
  364
  377
  391
  406
  422
  439
  458
  477
  498
  519
  543
  567
  593
  620
  649
  679
  711
  745
  780
  817
  857
  898
  942
  987
Total liabilities and equity, $m
  3,070
  3,140
  3,221
  3,312
  3,412
  3,522
  3,642
  3,772
  3,912
  4,062
  4,223
  4,394
  4,577
  4,771
  4,977
  5,194
  5,426
  5,670
  5,928
  6,200
  6,488
  6,790
  7,110
  7,447
  7,801
  8,174
  8,567
  8,980
  9,416
  9,872
Debt-to-equity ratio
  1.440
  1.610
  1.800
  1.990
  2.200
  2.410
  2.630
  2.850
  3.070
  3.290
  3.500
  3.720
  3.930
  4.140
  4.340
  4.530
  4.720
  4.910
  5.080
  5.260
  5.420
  5.580
  5.740
  5.880
  6.020
  6.160
  6.290
  6.420
  6.530
  6.650
Adjusted equity ratio
  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
  73
  142
  144
  147
  152
  157
  164
  172
  180
  190
  207
  220
  233
  248
  263
  281
  299
  320
  341
  365
  390
  416
  445
  476
  508
  543
  580
  620
  661
  706
Depreciation, amort., depletion, $m
  111
  114
  116
  119
  123
  126
  130
  135
  139
  144
  141
  147
  153
  159
  166
  174
  181
  190
  198
  207
  217
  227
  238
  249
  261
  273
  286
  300
  315
  330
Funds from operations, $m
  184
  255
  260
  267
  275
  284
  294
  306
  320
  335
  349
  366
  386
  407
  430
  454
  481
  509
  539
  572
  607
  643
  683
  725
  769
  816
  867
  920
  976
  1,036
Change in working capital, $m
  -5
  -6
  -7
  -8
  -9
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -33
  -35
  -37
  -39
Cash from operations, $m
  189
  261
  267
  275
  283
  293
  305
  317
  332
  347
  362
  381
  401
  424
  447
  473
  500
  530
  561
  595
  631
  669
  710
  753
  799
  848
  900
  955
  1,013
  1,075
Maintenance CAPEX, $m
  -101
  -103
  -105
  -108
  -111
  -114
  -118
  -122
  -126
  -131
  -136
  -141
  -147
  -153
  -159
  -166
  -174
  -181
  -190
  -198
  -207
  -217
  -227
  -238
  -249
  -261
  -273
  -286
  -300
  -315
New CAPEX, $m
  -12
  -16
  -18
  -20
  -22
  -25
  -27
  -29
  -31
  -34
  -36
  -38
  -41
  -43
  -46
  -49
  -52
  -55
  -58
  -61
  -64
  -68
  -72
  -75
  -79
  -84
  -88
  -93
  -97
  -102
Cash from investing activities, $m
  -113
  -119
  -123
  -128
  -133
  -139
  -145
  -151
  -157
  -165
  -172
  -179
  -188
  -196
  -205
  -215
  -226
  -236
  -248
  -259
  -271
  -285
  -299
  -313
  -328
  -345
  -361
  -379
  -397
  -417
Free cash flow, $m
  77
  143
  144
  147
  150
  154
  160
  167
  174
  183
  191
  202
  214
  227
  242
  258
  275
  294
  314
  336
  359
  385
  411
  440
  471
  504
  539
  576
  616
  658
Issuance/(repayment) of debt, $m
  -1,152
  64
  73
  82
  90
  99
  108
  117
  126
  135
  145
  154
  164
  175
  185
  196
  208
  220
  232
  245
  259
  273
  288
  303
  319
  336
  354
  372
  391
  412
Issuance/(repurchase) of shares, $m
  1,139
  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  
  -13
  64
  73
  82
  90
  99
  108
  117
  126
  135
  145
  154
  164
  175
  185
  196
  208
  220
  232
  245
  259
  273
  288
  303
  319
  336
  354
  372
  391
  412
Total cash flow (excl. dividends), $m
  64
  207
  217
  228
  240
  254
  268
  283
  300
  318
  335
  356
  378
  402
  427
  454
  483
  514
  546
  581
  618
  657
  699
  743
  790
  840
  892
  948
  1,007
  1,069
Retained Cash Flow (-), $m
  -1,211
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -21
  -22
  -23
  -24
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -46
Prev. year cash balance distribution, $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 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
  -1,148
  199
  209
  219
  230
  243
  256
  270
  286
  303
  319
  339
  360
  382
  406
  432
  460
  489
  521
  554
  589
  627
  667
  709
  755
  802
  853
  907
  964
  1,024
Discount rate, %
  14.50
  15.23
  15.99
  16.79
  17.62
  18.51
  19.43
  20.40
  21.42
  22.49
  23.62
  24.80
  26.04
  27.34
  28.71
  30.14
  31.65
  33.23
  34.90
  36.64
  38.47
  40.40
  42.42
  44.54
  46.76
  49.10
  51.56
  54.14
  56.84
  59.68
PV of cash for distribution, $m
  -1,002
  150
  134
  118
  102
  88
  74
  61
  50
  40
  31
  24
  18
  13
  9
  6
  4
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  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. is a manufacturer and marketer of beauty and related products. The Company's segments include Europe, Middle East & Africa; South Latin America; North Latin America, and Asia Pacific. Its product categories are Beauty, and Fashion and Home. Beauty consists of skincare (which includes personal care), 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 products include Anew Ultimate Supreme Advanced Performance Creme, Anew Vitale Visible Perfection Blurring Treatment, Big & Multiplied Volume Mascara, Avon True Perfectly Matte Lipstick, Avon Life for Him and for Her Fragrances, Far Away Infinity Fragrance and Avon Nutra Effects body collection with Active Seed Complex. The Company primarily sells its products to the consumer through the direct-selling channel.

FINANCIAL RATIOS  of  Avon Products, Inc. (AVP)

Valuation Ratios
P/E Ratio -16.9
Price to Sales 0.3
Price to Book -4.5
Price to Tangible Book
Price to Cash Flow 30.3
Price to Free Cash Flow -55.2
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 $5571 million for the last fiscal year's total revenue generated by Avon Products, Inc.. The default revenue input number comes from 0001 income statement of Avon Products, Inc.. 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 2% 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 14.5%, whose default value for AVP is calculated based on our internal credit rating of Avon Products, Inc., 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, Inc..
    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 86.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $511 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 7.7% for Avon Products, Inc..

Corporate tax rate of 27% is the nominal tax rate for Avon Products, Inc.. 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 12.1%.

Life of production assets of 6.7 years is the average useful life of capital assets used in Avon Products, Inc. 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 -4.6%. 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 - $-904.5 million for Avon Products, Inc. - 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 441.781 million for Avon Products, Inc. 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, Inc. at the current share price and the inputted number of shares is $1.8 billion.

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