Revlon, Inc. (REV) and its subsidiaries develop, manufacture, market, distribute, and sell beauty and personal care products worldwide. Its diverse array of products is offered in about 150 countries worldwide across most retail distribution channels, including prestige, salon, mass, and online.
The stock declined 67.1% year-to-date and 25.7% over the past month to close its last trading session at $3.73. Last week, REV declared Chapter 11 bankruptcy, becoming one of the first major companies to do so amid a global slump in corporate default activity.
However, according to speculations, Indian conglomerate Reliance is bidding for REV. This led the cosmetic company’s stock to soar significantly in the pre-market trading on Friday.
Furthermore, REV gained bankruptcy court approval to borrow $375 million, stating that the cash would be used to shore up supply chain issues that would otherwise jeopardize the cosmetic maker's sales during the critical holiday season.
Here's what could shape REV's performance in the near term:
Positive Development
In April, REV announced the completion of two strategic activations with ACTV8me, an interactive ad tech solutions platform. ACTV8me used its patented Sequential QR codesTM to reach consumers with special offers and tailored experiences (SQR codes).
REV is the first beauty firm to employ this technology to transmit promotional offers, discounts, beauty-related information, and new product reveals to REV clients in a sequential manner using ACTV8me's superior SQR codeTM solution.
Impressive Growth Prospects
Street expects REV's revenues to rise 5% in the current year and 5.1% next year. In addition, REV's EPS is expected to rise at a 5% CAGR over the next five years. Moreover, the company has an impressive earnings surprise history, as it topped Street EPS estimates in three of the trailing four quarters.
Discounted Valuation
In terms of forward EV/Sales of 1.63x, the stock is currently trading 9.8% lower than the industry average of 1.81x. Moreover, REV's forward Price/Sales of 0.09x is 92.4% lower than the industry average of 1.17x.
Analyst Price Target Indicates Potential Upside
The 12-month median price target of $8.50 indicates a 129.7% potential upside.
POWR Ratings Reflect Solid Prospects
REV has an overall grade of B, equating to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. REV has an A grade for Value and a B for Growth. The company's lower-than-industry valuation multiples are in sync with the Value grade. In addition, REV's solid earnings and revenue growth potential are consistent with the Growth grade.
Of the 68 stocks in the B-rated Fashion & Luxury industry, REV is ranked #9.
Beyond what I stated above, we have graded REV for Sentiment, Stability, Quality, and Momentum. Get all REV ratings here.
Bottom Line
While REV has recently filed for bankruptcy, the recent speculations surrounding its possible acquisition have instilled optimism about its future prospects. In addition, given the favorable analyst price target and the company's favorable growth prospects, we think investors should scoop up its shares now.
How Does Revlon (REV) Stack Up Against its Peers?
REV has an overall POWR Rating of B, which equates to a Buy rating. Check out these other stocks within the same industry with A (Strong Buy) ratings: J.Jill Inc. (JILL), Hugo Boss AG (BOSSY), and Caleres Inc. (CAL).
REV shares were trading at $3.73 per share on Monday morning, up $1.78 (+91.28%). Year-to-date, REV has declined -67.11%, versus a -22.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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