Ekaterina Zaitseva In troduction Coty Inc. ( NYSE: COTY ) has been growing steadily since its initial turnaround plan launched in 2019 to better leverage its platform and improve financial performance. While the company has made good on its near-term targets.
I find that the company’s long-term guidance too optimistic. With growth in the mid-single digits unlikely to accelerate from here, I don’t see room for much EBITDA growth. As the company has significant capex and pays a lot of its EBITDA out through interest expenses, I would be cautious when comparing the company to its historical valuation as well as peers.
With a valuation that doesn’t provide a compelling enough margin of safety if management misses its targets, I don’t see adequate upside potential or sufficient reasons why the stock should re-rate higher, given the better quality businesses available for paying up just a bit more. Company Overview Coty is a manufacturer and distributor of beauty products around the world, using licenses to work with some of the largest brands in the industry. The company segments its revenues into two categories: Prestige (62% of revenues) and Consumer Beauty (38% of revenues).
Author, based on data from S&P Capital IQ In the Prestige segment, Coty sells primarily through what it refers to as ‘prestige retailers’. This includes perfumeries, department stores, e-retailers, direct-to-consumer websites, and duty-free shops, almost always with a recognizable brand name att.