Will Private Equity Call On Avon?
Stocks: (AVP)
Avon's earnings were not particularly good, but the company has the advantage of being able to say that they were not supposed to be. The company has cut 10% of its work force and several layers of management, and the costs of much of that restructuring were in the quarterly numbers out today.
Revenue at the company did rise 5% over the same period last year, hitting $2.08 billion. Operating profit was down 35% to $225 million, but some of the drop can be attributed to restructuring.
The company's cash position equals its debt. The cash flow from operations for the quarter was almost $290 million. Shareholder equity is $1 billion.
The question is whether a private equity firm would pay 13 times net tangible book value.
If the company can be engineered as a private enterprise to produce cash flow of $1.5 billion, the company's $17 billion market cap may not be a huge obtacle. The stock now trades at $30. If it moves closer to its 52-week low at $24.33, it will be on a lot of radar screens.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in companies that he writes about.
Avon's earnings were not particularly good, but the company has the advantage of being able to say that they were not supposed to be. The company has cut 10% of its work force and several layers of management, and the costs of much of that restructuring were in the quarterly numbers out today.
Revenue at the company did rise 5% over the same period last year, hitting $2.08 billion. Operating profit was down 35% to $225 million, but some of the drop can be attributed to restructuring.
The company's cash position equals its debt. The cash flow from operations for the quarter was almost $290 million. Shareholder equity is $1 billion.
The question is whether a private equity firm would pay 13 times net tangible book value.
If the company can be engineered as a private enterprise to produce cash flow of $1.5 billion, the company's $17 billion market cap may not be a huge obtacle. The stock now trades at $30. If it moves closer to its 52-week low at $24.33, it will be on a lot of radar screens.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in companies that he writes about.
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