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Analyzing Coty’s Valuation Multiple after Fiscal 2016 Results

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Nov. 20 2020, Updated 3:52 p.m. ET

Relative valuation

Coty (COTY) and L’Oréal (LRLCY) are trading at higher valuation multiples relative to the S&P 500 Index (IVV)(SPY)(VOO) and the Dow Jones Industrial Average (DIA). Coty is trading at a PE (price-to-earnings) multiple of 26.1x its forward earnings. L’Oréal is trading at 27.1x its forward earnings. The S&P 500 Index and the Dow Jones Industrial Average are trading at forward PE multiples of 18.6x and 17.5x, respectively. All these valuations are as of August 16.

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Valuation of peers

Procter & Gamble (PG) and Estée Lauder (EL) are also trading at higher valuation multiples of 22.1x and 27.0x, respectively compared to the benchmark S&P 500 Index. However, Avon (AVP) is trading at the lowest PE multiple of 20.5x forward earnings.

To learn more about the deal, please see Coty Buys 43 Procter & Gamble Brands: What Investors Should Know.

Cleaning-up the portfolio

Coty’s F4Q16 revenue growth came in at 5.5%. However, fiscal 2016 revenue growth came in at -1.1%. In order to position the new Coty for sustainable growth, the company is planning to divest 6% to 8% of the combined portfolio revenues as per comments by Patrice de Talhouet.

Forward-looking

Plus, the company’s acquisition of the digital marketing platform Beamly should help contribute to a steep change in Coty’s capabilities to digitally engage with consumers. After the P&G Beauty Brands transaction, the merged organization is finalized, including office locations, structure, and staffing of key positions. Also, the Bourjois acquisition reached profitability levels exiting the fiscal year consistent with the rest of Coty’s Color Cosmetics segment.

Looking to fiscal 2017, Coty continues to work on building a healthier and better stand-alone business. Coty remains focused on growing its power brands through innovation, strong support levels, digital engagement with consumers, and improved “in-market” execution.

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 our Consumer Products page.

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