Aug. 12 at 1:03 AM
$COTY is cheap for a reason, and earnings need to deliver. The company still generates
$5.79B in revenue and
$812M EBITDA, but revenue is shrinking, operating margin is negative, TTM net income is a
$546M loss, and it carries
$3.42B of debt against only
$257M in cash. Current ratio is just 0.82 and short interest has climbed to 13.4% of the float. The interesting part is
$3.51 book value per share versus a stock in the low
$2S, plus
$505M operating cash flow and
$403M levered FCF. There’s real turnaround upside here, but this almost trades like an option on management executing, another ugly earnings report or weak outlook and the balance sheet gives investors plenty of reasons to keep selling. If earnings finally show stabilization, though, the valuation leaves a lot of room for a rerating.
