Over the past month, cosmetics company Coty Inc. (COTY) has risen by almost 66 percent. The news of the completion of the sale of the majority stake in Wella, which will provide Coty with a debt reduction and an improvement in its financial balance, was the key driver in the past week.
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Coty announced on December 1 the completion of a deal to sell KKR a 60 percent stake in the Wella hair care brand. Coty will earn $2.5 billion as a result of this deal, much of which will be used to pay back the debt. As a consequence, the net debt of the company would decline from $7.9 billion to around $5 billion.
News about the production of vaccines against COVID-19 supports the optimistic outlook for Coty. It is expected that the return of mobility, as well as the return of decorative cosmetics sales, would increase the traffic in shops.
Coty presented the details of the quarter in early November. Despite the fall in revenues, the results were higher than the predictions of Wall Street. Comparable revenues declined 19% year-on-year and income declined 13% to $1.69 billion. Wall Street estimated sales of $1.08 billion for comparison. Coty managed to slash costs in the last quarter to produce a windfall profit of $0.11 per share, compared to a loss estimated to be $0.05. According to Coty management, the results of the last quarter show that the business has become more resilient and better positioned for any future market disturbances under the control of the COVID-19 pandemic.
An optimistic outlook for Coty, whose business depends on the return of buyer activity, supports the anticipation of the end of the pandemic. Because of the large number of holidays, the firm may also expect some turnaround in the current year.
Coty Inc. (COTY) s stock was worth $7.13 at close of the business on Thursday, December 10. The shares are still 36 percent lower compared to the beginning of the year, despite a major price rise in November.