Coty Inc stock (NYSE: COTY) fell more than -10% in the last 5 trading days, while the S&P 500 barely moved. Does this warrant an investment decision? Should you buy or sell? We think that while near term return could be in the cards, Coty may not be a winning bet from a medium-to-longer term perspective. We arrive at our conclusion by assessing Coty’s recent market movement from three perspectives:
- relative positioning in the market
- underlying financial trends, and
- the output of the Trefis machine learning engine which looks at past patterns to predict near term behavior.
Our dashboard Big Movers: Coty Moved 10.6% – What Next? lays this out.
What relative positioning suggests: Are you a value investor who identifies and invests in under-priced securities based on market comparisons? Then this might be important to you.
Coty Inc.’s stock price decreased -65.9% this year, from $11.13 to $3.79, before moving -10.6% last week, and ending at $3.39. So what do multiples say? At the beginning of this year, Coty Inc.’s trailing 12 month P/S ratio was 1.33. This figure decreased -53.8% to 0.61, before ending at 0.55. So Coty appears to be a cheaper stock now compared to where it was at the year’s beginning. But is it cheaper than its peers? Compared to Coty Inc.’s P/S multiple of 0.55, the figure for its peer Ulta Beauty stands much higher at 2.06, suggesting room for growth for Coty.
What fundamentals suggest: Want to consider long term investment in Coty? Then pay attention here.
Coty Inc.’s stock price decreased -10.6% last week. This is in line with its long term price trend as the stock has decreased -40.1% between 2017 and 2019, and has decreased -81.8% between 2017 and now. Is there any chance of a rebound? We need to look at underlying financials for this. Coty Inc.’s revenue has decreased -17.8% from $7,650 Mil in 2017 to $6,288 Mil in 2019. For the last 12 months, this figure stood at $4,718 Mil, implying further decrease of -25% over 2019 numbers. What about margins? Coty Inc.’s net margins have decreased from -5.2% in 2017 to -60% in 2019. For the last 12 months, this figure stood at -21.3%. Clearly, the underlying financial trend is not encouraging suggesting that Coty can be a questionable bet unless it demonstrates a strong business rebound.
What machine learning algorithm suggests: More interested in short term returns? Then you might want to give this perspective more weight.
Our AI engine analyzes past patterns in stock movements to predict near term behavior for a given level of movement in the recent period and suggests a 27% probability of Coty moving up another 10% over the next 21 trading days. Compared to this, the probability of moving down by the same quantum is 20%, suggesting a slightly greater likelihood of upside. Our detailed dashboard highlights the chances of Coty’s stock rising after a fall and should help you understand near-term return probabilities for different levels of movements.
Taking all 3 perspectives together, investing in Coty might be a debatable decision, though near term returns could be possible. But, what if you could invest in a winner portfolio? Here’s a top-quality portfolio to outperform the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.
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