Revlon, Inc. – Value Analysis (NYSE:REV) : June 20, 2017

Capitalcube gives Revlon, Inc. a score of 22.

Our analysis is based on comparing Revlon, Inc. with the following peers – Avon Products, Inc., Estee Lauder Companies Inc. Class A, Inter Parfums, Inc., Nu Skin Enterprises, Inc. Class A, L’Oreal SA Unsponsored ADR, Coty Inc. Class A, Procter & Gamble Company, Edgewell Personal Care Co. and CCA Industries, Inc. (AVP-US, EL-US, IPAR-US, NUS-US, LRLCY-US, COTY-US, PG-US, EPC-US and CAW-US).

Investment Outlook

Revlon, Inc. has a fundamental score of 22 and has a relative valuation of UNDERVALUED.

Fundamental Score

Access our research and ratings on Revlon, Inc.

Company Overview

  • Compared to peers, relative underperformance over the last year is in contrast with the more recent outperformance.
  • Revlon, Inc. Class A currently has a negative book value and its current Price/Assets ratio of 0.40 is lower than its peer median (1.38).
  • REV-US‘s book value of equity is not positive and suggests that that it is not meaningful to analyze its ROE versus P/E in order to determine whether the company has an operating or growth advantage.
  • REV-US has relatively low profit margins and median asset efficiency.
  • Changes in annual revenues (relative to peers) are better than the change in its earnings (relative to peers), implying the company is focused more on revenues.
  • REV-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • While REV-US‘s revenue growth in recent years has been above the peer median, the stock’s Price/EBITDA ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company’s capital investment program and to-date returns suggest that the company is likely making big bets on the future.
  • REV-US seems too levered to raise additional debt.

Access our research and ratings on Revlon, Inc.

Leverage & Liquidity

REV-US would seem to have a hard time raising additional debt.

  • With debt at a relatively high 66.92% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 13.93%), and relatively tight interest coverage level of 1.55x, REV-US would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • All 9 peers for the company have an outstanding debt balance.

REV-US has moved to a Limited Flexibility from a relatively high leverage profile at the recent year-end.

  • REV-US‘s interest coverage is its lowest relative to the last five years and compares to a high of 3.01x in 2015.
  • Though its interest coverage decreased to 1.55x from 2.40x (in 2016), its peer median remained relatively stable during this period at 10.80x.
  • Interest coverage fell 0.52 points relative to peers. It is also below the 2.50x coverage benchmark unlike the peer median.
  • REV-US‘s debt-EV is its highest relative to the last five years and compares to a low of 54.84% in 2014.
  • Though its debt-EV has remained relatively stable at 66.92% compared to 2016, its peer median has decreased to 13.93% from 15.96% during this period.
  • Relative to peers, debt-EV rose 2.45 percentage points. Unlike the peer median, it is also above the 25% leverage benchmark.

Access the detailed analysis for Revlon, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Avon Products, Inc. 50.77 1.34 2.81 25.44
Estee Lauder Companies Inc. Class A 11.72 1.74 27.49 40.41
Inter Parfums, Inc. 6.36 3.32 39.38 88.95
Nu Skin Enterprises, Inc. Class A 14.19 1.79 16.8 57.03
L’Oreal SA Unsponsored ADR 1.31 1.09 139.26 477.01
Coty Inc. Class A 34.83 1.15 2.84 1.43
Procter & Gamble Company 12.28 0.89 27.61 41.62
Edgewell Personal Care Co. 30.03 2.19 4.8 17.27
CCA Industries, Inc. 13.67 0.87 4.49 75.07
Revlon, Inc. Class A 66.92 1.48 1.55 3.44
Peer Median 13.93 1.41 10.8 41.02
Best In Class 1.31 3.32 139.26 477.01

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Company Profile

Revlon, Inc. manufactures, markets and sells beauty and personal care products. The company’s products include cosmetics, hair color, hair care and hair treatments, beauty tools, men’s grooming products, anti-perspirant deodorants, fragrances, skincare and other beauty care products. It operates its business through the following segments: consumer segment, professional segment, Elizabeth Arden, and other segment. The Consumer segment is comprised of products that are manufactured, marketed and sold primarily within the mass retail channel in the U.S. and internationally, as well as certain department stores and other specialty stores outside the U.S., under brands such as Revlon, Almay, SinfulColors and Pure Ice in cosmetics; Revlon ColorSilk in women’s hair color; Revlon in beauty tools; and Mitchum in anti-perspirant deodorants. The Professional segment manufactures, markets and sells professional products primarily to hair and nail salons and distributors in the U.S. and internationally under brands such as Revlon Professional in hair color, hair care and hair treatments; CND in nail polishes and enhancements, including CND Shellac and CND Vinylux nail polishes; and American Crew in men’s grooming products. The Elizabeth Arden segment markets, distributes and sells fragrances, skin care and color cosmetics to prestige retailers, specialty stores, the mass retail channel, distributors, perfumeries, department stores, boutiques, travel retailers and other retailers in the U.S. and internationally, as well as direct sales to consumers via its Elizabeth Arden Red Door branded retail stores. The Other segment includes the operating results of the CBB business and related purchase accounting for the CBB Acquisition. The company was founded by Charles Revson, Joseph Revson, and Charles Lachman in March 1932 and is headquartered in New York, NY.

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