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Coty Inc Class A COTY

Morningstar Rating
$12.97 +0.33 (2.61%)
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Company Report

Coty Earnings: Fragrance Strength Fuels Growth but Weak Skincare Lineup Remains a Concern

We don't plan any material changes to our $10.50 and EUR 9.50 fair value estimates for no-moat Coty after absorbing the beauty maker’s second-quarter results in fiscal 2024. Organic sales and adjusted EPS were up 11% and 14%, respectively, edging our 10% and 11% projections due to successful new launches, broadening retail distribution in the premium fragrance aisle, and cost discipline. However, we remain unenthused about Coty’s long-term prospects given its reliance on the small fragrance category and a lack of compelling premium brands in the larger skincare category that offers more attractive growth and margin potentials. We are maintaining our 10-year forecasts for 5% sales CAGR and 14% average operating margins, and view shares as richly valued.

Price vs Fair Value

COTY is trading at a 24% premium.
Price
$12.97
Fair Value
$72.80
Uncertainty
High
1-Star Price
$83.23
5-Star Price
$5.20
Economic Moat
Hfqf
Capital Allocation
Nfbj

Bulls Say, Bears Say

Bulls

We think CEO Sue Nabi, with her 20 years of experience at L’Oreal and track record of successfully launching high-end skincare brand Orveda, has the vision and skillset to accelerate growth at Coty.

Bears

Coty’s lack of premium skincare and makeup brands handicaps its ability to benefit fully from the premiumization trends in beauty.

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News

Trading Information

Previous Close Price
$12.64
Day Range
$12.8713.15
52-Week Range
$9.0213.46
Bid/Ask
$12.25 / $13.25
Market Cap
$11.61 Bil
Volume/Avg
5.5 Mil / 4.6 Mil

Key Statistics

Price/Earnings (Normalized)
21.48
Price/Sales
1.71
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield

Company Profile

Coty is a global beauty maker that focuses on fragrance (59% of sales) and color cosmetics (28%), with limited exposure to skincare (5%) and body care (8%). For its fragrance business, Coty licenses luxury and high-end brands including Gucci, Burberry, Hugo Boss, Davidoff, and Calvin Klein, while its consumer cosmetics business focuses on acquired mass brands such as CoverGirl, Max Factor, Rimmel, Sally Hansen, and Bourjois. It also collaborates with social media celebrities Kim Kardashian and Kylie Jenner to launch makeup products bearing their names. By region, Coty generates close to 45% of sales from Europe, 30% from North America, 10% from Asia, and 8% from Latin America, with the rest from travel retail. German investment firm JAB is a controlling shareholder, with a 53% stake.
Sector
Consumer Defensive
Industry
Household & Personal Products
Stock Style Box
Mid Growth
Total Number of Employees
11,350

Competitors

Financial Strength

Metric
COTY
4911
EL
Quick Ratio
0.330.770.87
Current Ratio
0.851.291.36
Interest Coverage
2.935.462.79
Quick Ratio
COTY
4911
EL
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