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Avon Products Inc. Message Board

  • deshrex deshrex Sep 14, 2012 8:30 PM Flag

    AVP vs REV

    I thought REV might overtake AVP this week on a price to sales basis, but AVP maintains a narrow lead, .64 to .56, a 14% difference. REV got big bids for 2 or 3 days there but tapered off on Friday.

    A comparison is interesting because they both spend about the same amount of money each year on interest. In '11, REV spent $91.3 million and AVP spent $92.9 million ( Yahoo data ). But AVP takes in much more revenue. In '11 it took in $11.291 billion to REV's $1.381 billion (Yahoo), so AVP is about 8x bigger in terms of revenue. In terms of percentages, AVP spent about .8% on interest in '11, while REV spent 6.6% of revenues on interest.

    Now the interesting thing here is that despite spending so much more than AVP on interest, REV actually had only modestly lower profit margins in '11 than AVP. From Yahoo, REV earned $53.4 million in '11, for a profit margin of roughly 3.9%, while AVP earned $513.6 million, for a profit margin of 4.5%. Conceivably, if REV had spent as little on interest as AVP, then it could have added nearly 600 basis points to its profit margin, which would then come in around 10%. So REV is out earning AVP in the non-interest portion of its business. All of which kind of begs the question of what is draining AVP's profit margin? It can't keep up with little REV?

    REV pays no dividend, of course, and hasn't paid down any debt in the last 3 years (Yahoo), but a betting question might be, will REV pay down debt before AVP improves margins, or vice versa? I think both stocks are cheap and interesting on a price to sales basis.

    Sentiment: Hold

 
AVP
3.555-0.295(-7.66%)10:59 AMEDT