Is Coty a Value Opportunity After a 53% Share Price Slide?

• If you are wondering whether Coty is a beaten down value opportunity or a value trap at today’s price, this article will walk you through what the numbers really say.
• The stock has barely budged in the short term, up 1.2% over the past week and just 0.3% over the last month. However, zooming out shows a much rougher ride, with the share price down 52.5% year to date and 53.7% over the last year.
• Those steep longer term declines reflect a mix of investor concerns around the pace of Coty’s turnaround, brand repositioning and execution on its strategic reshaping. These factors have kept sentiment cautious and the valuation under pressure. At the same time, progress on sharpening the portfolio, deleveraging and refocusing on core beauty and fragrance lines has nudged some investors to revisit whether the current share price underestimates the company’s future earnings power.
• On our checks, Coty scores a solid 5/6 valuation score, suggesting it screens as undervalued on most of the metrics we track. Next we will break down what that looks like under different valuation approaches, before finishing with a more holistic way to think about what the stock is really worth.

Find out why Coty's -53.7% return over the last year is lagging behind its peers.

Approach 1: Coty Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth today by projecting its future cash flows and then discounting those back to their value in today’s dollars.

For Coty, the latest twelve month Free Cash Flow stands at about $276 million, and analysts expect this to rise steadily over the coming decade. Projections used in this 2 Stage Free Cash Flow to Equity model see Free Cash Flow climbing to roughly $867 million by 2035, with the early years guided by analyst estimates and the later years extrapolated by Simply Wall St based on those trends.

When all those future cash flows are discounted back, the model arrives at an intrinsic value of about $9.24 per share. Compared with the current share price, this indicates Coty may be trading at a 64.7% discount to its DCF value, which suggests the market could be pricing in a weaker future than the cash flow outlook used in the model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Coty is undervalued by 64.7%. Track this in your watchlist or portfolio, or discover 914 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Coty.

Approach 2: Coty Price vs Sales

For a business like Coty, where investors are focused on branded revenue potential as much as near term earnings, the Price to Sales multiple is a useful way to compare what the market is paying for each dollar of revenue across similar companies.

In general, higher expected growth and lower perceived risk justify a richer multiple. Slower growth or more uncertainty should pull that multiple closer to, or even below, the sector norm. Coty currently trades on a Price to Sales ratio of about 0.49x, which is well below both the Personal Products industry average of roughly 0.83x and the wider peer group average of around 1.68x.

Simply Wall St’s Fair Ratio of 1.11x is a proprietary estimate of what Coty’s Price to Sales multiple should be once you factor in its specific growth outlook, profitability profile, risk characteristics, industry positioning and market cap. Because it is tailored to the company, this benchmark is more informative than a simple comparison with peers or industry averages. Lining the two up, Coty’s current 0.49x multiple sits meaningfully below the 1.11x Fair Ratio, indicating that the stock appears undervalued on a sales based lens.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1466 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Coty Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework on Simply Wall St’s Community page that lets you combine your story about Coty with your assumptions for its future revenue, earnings, margins and fair value. You can then compare that fair value to today’s price to decide whether to buy or sell. The platform keeps your view automatically updated as new news or earnings arrive. For example, one investor might build an optimistic Coty Narrative where innovation, premiumization and margin expansion justify a fair value near the most bullish target of about $8 per share. A more cautious investor might emphasize Gucci license risk, competition and leverage to arrive closer to the most bearish view of roughly $3.5. Narratives turn both of those perspectives into transparent, dynamic forecasts you can understand, challenge and adapt over time.

Do you think there's more to the story for Coty? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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