Beauty company Coty (COTY) reported revenue growth across many of its categories in its last quarter. Also, the company expects its earnings to soar over the next few years. So, read on for details on why we think it could be wise to add the stock to one’s portfolio now.
New York City-based Coty is one of the world’s largest beauty companies. It offers a portfolio of products across fragrance, color cosmetics, and skin and body care. The stock has declined 17.7% in price so far this year to close yesterday’s trading session at $8.64. However, it has gained 25.4% over the past year and 11.8% over the past three months. And lately, hedge funds’ interest has increased in the stock.
COTY’s financial net debt improved by approximately $200 million to less than $5 billion at the end of the last reported quarter. In addition, it raised its adjusted per-share earnings guidance for fiscal 2022 to a range of $0.20 – $0.24, up from prior guidance of $0.19 to $0.23.
Also, its CEO, Sue Y. Nabi, said on Nov. 18, 2021, “We expect to outperform the beauty market through FY25 and beyond.” So, we think COTY’s near-term prospects look promising.
Here are the factors that could shape COTY’s performance in the upcoming months:
On Nov. 18, 2021, COTY announced that it had entered into a licensing agreement with France-based Orveda, which is likely to help expand its Prestige portfolio. COTY’s COVERGIRL launched its first-ever skincare collection with Clean Fresh Skincare on Nov. 15, 2021.
Also last November, COTY announced a definitive agreement to deliver an approximate 4.7% stake in Wella to KKR in exchange for the redemption of approximately 56% of KKR’s remaining convertible preferred shares in COTY. The transaction is expected to simplify its capital structure and generate roughly $14 million in annual dividend savings.
Revenue Growth Across Major Categories
For its fiscal first quarter, ended Sept. 30, 2021, COTY’s net revenues increased 22% year-over-year to $1.37 billion. Its revenue from the Prestige segment increased 35% year-over-year to $870.70 million, while its revenue from the Consumer Beauty segment came in at $501 million, up 4% year-over-year. Its operating income was $17.20 million, versus a $66 million loss in the year-ago period. Also, its net income increased 86.7% from the same period last year to $228.90 million.
Favorable Analyst Estimates
COTY’s revenue is expected to increase 14.5% in its fiscal 2022 and 6.1% in fiscal 2023. Its EPS is expected to grow by 2,600% this year and 44.4% next year. Also, Wall Street analysts expect the stock to hit $13.14 in the near term, which indicates a potential 52.1% upside.
In terms of forward non-GAAP PEG, COTY’s 0.34x is 87.9% lower than the 2.81 industry average. And the stock’s 1.36x forward P/S is 3.5% lower than the 1.41x industry average. Also, its 2.01x and 9.58x respective forward P/B and P/CF are lower than the 3.36x and 15.21x industry averages.
POWR Ratings Show Promise
COTY has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. COTY has an A grade for Growth, which is consistent with analysts’ expectations that its revenue and EPS will increase.
COTY is ranked #32 out of 64 stocks in the A-rated Fashion & Luxury industry. Also, click here to see the additional POWR Ratings for COTY (Value, Momentum, Stability, Sentiment, and Quality).
COTY has been making consistent product and services improvements and restructuring its capital structure. It expects its growth to soar over the next few years. Also, its stock is trading at a discount to its peers. So, we think it could be wise to add the stock to one’s portfolio now.
How Does Coty (COTY) Stack Up Against its Peers?
While COTY has an overall POWR Rating of B, one could also check out its A-rated (Strong Buy) industry peers: Shoe Carnival, Inc. (SCVL), J.Jill, Inc. (JILL), and Oxford Industries, Inc. (OXM).
COTY shares rose $0.12 (+1.39%) in premarket trading Friday. Year-to-date, COTY has declined -17.71%, versus a -5.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
Dune: Awakening made its debut at The Game Awards as an open world survival massively multiplayer online game.
The game from Funcom and Nukklear looks beautiful, full of very detailed imagery of the desert planet Arrakis, also known as Dune. The game asked for beta signups, but we got no other information. Survival is the key word. Dune is a very deadly world, with sandworms and an unforgiving climate.
You can see places in the trailer like the city of Arakeen by day and night, as well as desert biomes and more. It’s not clear when it is coming. With luck, it will be close to the second Dune movie coming in late 2023.
Fighting Game fans are excited now that Capcom announced that Street Fighter 6 is coming to PS5, PS4, Xbox Series X/S and PC on June 2, 2023. The game was initially announced in February 2022, but that reveal did not include a specific release date beyond 2023.
The trailer at The Game Awards focused on new mini games and the international setting. In addition to the 18 previously announced fighter, the trailer also confirms that several new fighters — Dee Jay, Manon, Marisa and JP — that will join the game’s roster.
Notably, the June 2 release date for Street Fighter 6 may be a strategic choice for Capcom. June is the very beginning of Q3.
The last installment of the franchise — Street Fighter V — released nearly seven years ago so fans have been eager for another installment. A day before The Game Awards, the game’s June release date was leaked via the PlayStation Store.
Opinions expressed by Entrepreneur contributors are their own.
Entrepreneurship is a daily leap of faith. In times of economic uncertainty, that leap may feel like a dive off a cliff. We are in one of those times. It likely will take months to fully re-adjust to the forces that have pummeled the world’s economy, and to entrepreneurs, months can feel like years.
With the right playbook, entrepreneurs can survive and thrive in whatever economic scenario. Here are five things you can do to propel your business ahead now and through the difficulties of business cycles for years to come.
1. Learn the lessons of more challenging times
A rocky economy presents a unique opportunity to make tough decisions about the business plan. Everything is open to reexamination. How has the market changed? Are your customers facing challenges that create new opportunities for your solutions? How do new conditions change your assumptions, and what actions do you need to take in response?
Critically evaluate your product roadmap. Is this the time to pivot or become more aggressive with your current plans? Prioritize the highest margin features that are achievable in the next twelve months. Push out projects that don’t make that list, and re-assign resources accordingly. Re-assess pricing. Even as inflation tiptoes back from the highest levels in forty years, raw material and transportation costs remain way up. What will impact your customers if you adjust the pricing or add surcharges to offset these costs, at least temporarily?
It’s been a rough year for hiring. Many companies took the talent they could get. If there are employees or gig workers who would fare better in a different job, now is the time to let them go. Make tough-minded corrections that will pay off overall — corrections that might be avoidable in less challenging times.
Venture capitalists are pulling back. In the third quarter, Crunchbase reported that funding for startups in U.S. and Canada fell 50% year-over-year. Valuations are down across the board. If you are fortunate enough to be a later-stage startup that benefited from VC largess in 2021, make your last raise last longer than intended.
Keep your dry powder dry, and put off going for another round until the markets even out. Reemphasize the basics for early-stage companies with less market validation and greater distance between now and a potential exit. Delay all capital expenditures. Leverage the hybrid work model if possible, to reduce rent and other office expenses. Continue with Zoom or Google Meet. Now is not the time to rack up travel costs. Re-negotiate fees and terms with service providers. Seek credit terms with key suppliers, in a word, bootstrap.
3. Talk to customers, in person. Now.
How have the business needs of your customers — whether paying or beta — changed over the last 18 months? Are there benefits to your solution that have more recognized value now? Nearly every business, for example, from corporates to startups, has been forced to re-learn the lessons of supply chain management. Startups that can help their customers make better business decisions based on artificial intelligence (AI), reduce costs by improving inventory management or protect against out-of-stock scenarios by identifying and building relationships with new, more local sources of supply will have an edge.
According to PitchBook, venture capitalists are showing greater interest in portfolio companies “whose satellite, robotics and software tools can do double duty” in military and commercial markets. International conflicts are one reason, of course.
Another is that the defense and military security industries are generally viewed as recession-proof. Our firm routinely encourages portfolio companies to consider non-dilutive funding from the Small Business Administration — grants to support cutting-edge technologies range from $150,000 to more than $1 million.
Navigating the application process isn’t for the faint of heart. A startup must be realistic about the work involved, but in many states, there are resources to help. Besides the funding, severe responses to agency requests for proposals are reviewed and evaluated by technologists. At a minimum, this can be terrific feedback and a great source of industry contacts.
5. Blue-chip cultures attract blue-chip talent
Company culture can be an asset or a liability. An inclusive, rich culture helps key hires say yes. Finding stakeholders that believe what you believe and are aligned with your team’s values significantly improves the odds that they will stick with you in good times or bad.
After months of “great resignation” fever, the over-heated demand for talent may be cooling off. Maybe offers aren’t as fast or grand as they were a year ago. Maybe Twitter won’t be the only advanced technology business to let people go. Regardless, the search for great talent isn’t a faucet that a young company turns off and on. A startup might modulate the timing or the number of hires but stand at the ready to recruit and filter for culture fit.
With the right mindset and intentional approach, an entrepreneur can make 2023 a year to strive and thrive. As Yogi Berra, my favorite baseball player of all time, said, “Swing at the strikes.” In business, like baseball, the right swing can turn even the most challenging pitch into a hit.