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How Does Coty’s Valuation Compare to Its Peers’?

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Relative valuation

Coty (COTY) and Estée Lauder (EL) are trading at higher valuations relative to the S&P 500 Index (IVV) (SPY) (VOO) and the Dow Jones Industrial Average (DIA). Coty is trading at a forward PE (price-to-earnings) multiple of 30.3x.

Estée Lauder is trading at a forward PE multiple of 28.5x. In comparison, the S&P 500 Index and the Dow Jones Industrial Average are trading at forward PE multiples of 17.8x and 16.7x, respectively. All valuations are as of April 25, 2016.

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Valuations of peers

Procter & Gamble (PG) and L’Oréal (LRLCY) are also trading at higher PE multiples of 21.0x and 25.6x, respectively, compared to the benchmark S&P 500 Index. Avon (AVP) is trading at the lowest forward PE multiple of 20.7x.

Strong innovation pipeline

Despite Coty’s falling revenue growth of 3.9% in fiscal 2Q16, the company aims to clean up its past portfolio practices while strengthening its innovation pipeline and improving its innovation capabilities. Also, the company recently acquired Beamly, a digital marketing company that will help Coty to accelerate growth as well as sales execution and e-commerce.

Coty’s acquisition of Hypermarcas will help to increase its exposure to higher growth in emerging markets. It will also provide a strong platform for the current Coty business and the future P&G Specialty Beauty Business in Brazil. Hypermarcas is a highly profitable business, with operating margins above Coty’s levels.

Also, the Tiffany fragrance license will further strengthen Coty’s prestigious fragrance portfolio. These acquisitions will help Coty not only to be a leader in cosmetics but also to expand its business.

To learn more about Coty’s business, please read Coty Inc.: An Investor’s Guide to the Cosmetics Giant.

For more industry updates and analysis, please visit Market Realist’s Consumer Products page.

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