2-Star Stocks Poised to Plunge: Avon Products?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, beauty products specialist Avon Products (NYSE: AVP  ) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Avon's business and see what CAPS investors are saying about the stock right now.

Avon facts

Headquarters (founded) New York (1886)
Market Cap $7.1 billion
Industry Personal products
Trailing-12-Month Revenue $11.0 billion
Management CEO Sherilyn McCoy (since May 2012)
CFO Kimberly Ross (since May 2011)
Return on Equity (average, past 3 years) 35.8%
Cash/Debt $1.3 billion / $3.5 billion
Dividend Yield 5.7%
Competitors L'Oreal
Mary Kay
Revlon

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 13% of the 420 members who have rated Avon believe the stock will underperform the S&P 500 going forward.

Earlier this week, one of those Fools, Realstromprophet, succinctly summed up the Avon bear case for our community:

Revolving debt is nearly 1 billion dollars short term, not to mention the 2.5 billion in long term debt.

Cash equivalents only 1.25 billion, Net income continues to decline from 2008, while the debt position remains largely the same.

Payout ratio is 159%, given the declining income and no improvement to debt, that is not going to last. When they start slashing the dividend, anyone that is attracted to the stock for that will be leaving. ...

I don't see anything on the long horizon that saves this company. They could get bought out, after losing a bunch more of their stock price. Steer clear. Why bother with an unstable dividend outlook and non grower in this environment?

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.


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