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Coty Trading Cheaper Than Industry: What's the Next Best Move?
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Coty Inc. (COTY - Free Report) is currently trading at a discount to its historical and industry benchmarks. COTY stock trades at a forward 12-month price-to-earnings ratio of 10.57, below its median level of 13.30 in the past year and lower than the industry’s average of 23.01. This suggests that COTY may be undervalued relative to its earnings potential, presenting an attractive opportunity for investors. The company's current Value Score of B further highlights its potential for long-term growth.
COTY Stock P/E Performance
Image Source: Zacks Investment Research
Coty’s shares have lost 11.9% in the past three months compared with the industry and the S&P 500 index’s decline of 8.6% and 0.9%, respectively, highlighting a more modest performance amid broader market strength.
Let us analyze the fundamentals of Coty to understand the key drivers behind its market position and financial resilience.
Building for the Future: Coty’s Multi-Pronged Growth Strategy
Coty’s focus on six strategic pillars has been instrumental in driving sustainable growth. These include stabilizing Consumer Beauty brands, accelerating luxury fragrances, expanding into the skincare segment, enhancing e-commerce and direct-to-consumer capabilities, growing in China and leading the industry in sustainability. This multi-pronged strategy helped the company maintain its competitive edge, especially in the high-growth Prestige beauty sector.
Coty continued to outperform the market in e-commerce sell-out across both its Prestige and Consumer Beauty divisions during the third quarter of fiscal 2025. E-commerce represents approximately 20% of the company’s total sales, underscoring its growing importance as a strategic channel. Looking ahead, Coty plans to further strengthen this channel with the launch of another brand on Amazon in the first quarter of fiscal 2026. In addition, the company is also tapping into emerging platforms such as TikTok Shop to drive consumer engagement and brand visibility. These highlight the company's robust digital capabilities and brand relevance.
Coty is progressing well with the All In to Win transformation program across five key work areas, driving notable improvement in cost, gross margins, sales growth and cash. The company’s cost reduction program has been helping it redirect capital to structural growth capabilities and teams. In the third quarter of fiscal 2025, Coty achieved approximately $40 million in cost savings, with most of the savings in gross margin-related areas. For the full-fiscal year, the company remains on track to deliver total productivity savings of around $120 million.
Looking ahead, Coty plans to accelerate growth in its Prestige division in fiscal 2026 with two major fragrance launches and U.S. expansion of a top brand. The company aims to capture opportunities across ultra-premium scents, body mists and pen sprays. In Consumer Beauty, Coty will roll out new fragrance lines with key retailers and expand into adjacent categories. Innovation will be supported by new technologies across cosmetics. These efforts are backed by a focus on winning channels like e-commerce and TikTok Shop to reinforce Coty’s global fragrance leadership.
Challenges Tempering Coty’s Performance
Coty’s U.S. operations, critical to its global footprint, were the primary driver of the like-for-like sales decline in the third quarter of fiscal 2025 and represented the biggest headwind to year-to-date performance. In response, Coty has announced U.S. market leadership changes and organizational restructuring aimed at enhancing agility and execution across its U.S. operations. Until then, the continued underperformance in this core geography could erode investor sentiment and raise questions about Coty’s ability to regain market share in its largest region.
Coty’s strong Prestige division faced a convergence of three significant headwinds in the third quarter of fiscal 2025. First, the overall prestige fragrance market slowed notably. Second, the company’s innovation calendar in fiscal 2025 lacked major new product launches. Third, the company continued to work through elevated inventory levels at retailers. In addition to the triple headwinds, Prestige's makeup sales also declined. Together, these pressures highlight the vulnerability of the Prestige segment in the current-fiscal year.
Coty has been experiencing higher advertising and consumer promotions (A&CP) spending for a while now. In the third quarter of fiscal 2025, the A&CP percentage remained in the high 20s, showing a year-on-year rise. If not effectively managed, the continued increase in such expenses could further impact Coty’s margins and profitability in the coming quarters.
COTY Stock Past Three Months Performance
Image Source: Zacks Investment Research
Analysis of Coty Stock
Coty has shown strategic discipline through its transformation efforts, digital expansion and focus on high-growth channels. Despite recent pressures, including softness in the U.S. market and inventory challenges, the company remains well-positioned for long-term growth, supported by its strong presence in Prestige beauty and e-commerce. While its discounted valuation offers an attractive entry point, near-term headwinds may limit upside potential. All considered, existing investors may choose to hold their positions as Coty navigates its recovery. Currently, Coty carries a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for Nomad Foods' current fiscal-year sales and earnings implies growth of 5% and 7.3%, respectively, from the prior-year levels. NOMD delivered a trailing four-quarter earnings surprise of 3.2%, on average.
Mondelez International, Inc. (MDLZ - Free Report) manufactures, markets and sells snack food and beverage products in Latin America, North America, Asia, the Middle East, Africa and Europe. It presently carries a Zacks Rank of 2 (Buy). MDLZ delivered a trailing four-quarter earnings surprise of 9.8%, on average.
The Zacks Consensus Estimate for Mondelez International’s current financial-year sales indicates growth of 4.9% from the year-ago numbers.
Oatly Group AB (OTLY - Free Report) , an oatmilk company, provides a range of plant-based dairy products made from oats. It presently carries a Zacks Rank of 2. OTLY delivered a trailing four-quarter earnings surprise of 25.1%, on average.
The consensus estimate for Oatly Group’s current fiscal-year sales and earnings implies growth of 2.7% and 56.6%, respectively, from the year-ago figures.
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Coty Trading Cheaper Than Industry: What's the Next Best Move?
Coty Inc. (COTY - Free Report) is currently trading at a discount to its historical and industry benchmarks. COTY stock trades at a forward 12-month price-to-earnings ratio of 10.57, below its median level of 13.30 in the past year and lower than the industry’s average of 23.01. This suggests that COTY may be undervalued relative to its earnings potential, presenting an attractive opportunity for investors. The company's current Value Score of B further highlights its potential for long-term growth.
COTY Stock P/E Performance
Image Source: Zacks Investment Research
Coty’s shares have lost 11.9% in the past three months compared with the industry and the S&P 500 index’s decline of 8.6% and 0.9%, respectively, highlighting a more modest performance amid broader market strength.
Let us analyze the fundamentals of Coty to understand the key drivers behind its market position and financial resilience.
Building for the Future: Coty’s Multi-Pronged Growth Strategy
Coty’s focus on six strategic pillars has been instrumental in driving sustainable growth. These include stabilizing Consumer Beauty brands, accelerating luxury fragrances, expanding into the skincare segment, enhancing e-commerce and direct-to-consumer capabilities, growing in China and leading the industry in sustainability. This multi-pronged strategy helped the company maintain its competitive edge, especially in the high-growth Prestige beauty sector.
Coty continued to outperform the market in e-commerce sell-out across both its Prestige and Consumer Beauty divisions during the third quarter of fiscal 2025. E-commerce represents approximately 20% of the company’s total sales, underscoring its growing importance as a strategic channel. Looking ahead, Coty plans to further strengthen this channel with the launch of another brand on Amazon in the first quarter of fiscal 2026. In addition, the company is also tapping into emerging platforms such as TikTok Shop to drive consumer engagement and brand visibility. These highlight the company's robust digital capabilities and brand relevance.
Coty is progressing well with the All In to Win transformation program across five key work areas, driving notable improvement in cost, gross margins, sales growth and cash. The company’s cost reduction program has been helping it redirect capital to structural growth capabilities and teams. In the third quarter of fiscal 2025, Coty achieved approximately $40 million in cost savings, with most of the savings in gross margin-related areas. For the full-fiscal year, the company remains on track to deliver total productivity savings of around $120 million.
Looking ahead, Coty plans to accelerate growth in its Prestige division in fiscal 2026 with two major fragrance launches and U.S. expansion of a top brand. The company aims to capture opportunities across ultra-premium scents, body mists and pen sprays. In Consumer Beauty, Coty will roll out new fragrance lines with key retailers and expand into adjacent categories. Innovation will be supported by new technologies across cosmetics. These efforts are backed by a focus on winning channels like e-commerce and TikTok Shop to reinforce Coty’s global fragrance leadership.
Challenges Tempering Coty’s Performance
Coty’s U.S. operations, critical to its global footprint, were the primary driver of the like-for-like sales decline in the third quarter of fiscal 2025 and represented the biggest headwind to year-to-date performance. In response, Coty has announced U.S. market leadership changes and organizational restructuring aimed at enhancing agility and execution across its U.S. operations. Until then, the continued underperformance in this core geography could erode investor sentiment and raise questions about Coty’s ability to regain market share in its largest region.
Coty’s strong Prestige division faced a convergence of three significant headwinds in the third quarter of fiscal 2025. First, the overall prestige fragrance market slowed notably. Second, the company’s innovation calendar in fiscal 2025 lacked major new product launches. Third, the company continued to work through elevated inventory levels at retailers. In addition to the triple headwinds, Prestige's makeup sales also declined. Together, these pressures highlight the vulnerability of the Prestige segment in the current-fiscal year.
Coty has been experiencing higher advertising and consumer promotions (A&CP) spending for a while now. In the third quarter of fiscal 2025, the A&CP percentage remained in the high 20s, showing a year-on-year rise. If not effectively managed, the continued increase in such expenses could further impact Coty’s margins and profitability in the coming quarters.
COTY Stock Past Three Months Performance
Image Source: Zacks Investment Research
Analysis of Coty Stock
Coty has shown strategic discipline through its transformation efforts, digital expansion and focus on high-growth channels. Despite recent pressures, including softness in the U.S. market and inventory challenges, the company remains well-positioned for long-term growth, supported by its strong presence in Prestige beauty and e-commerce. While its discounted valuation offers an attractive entry point, near-term headwinds may limit upside potential. All considered, existing investors may choose to hold their positions as Coty navigates its recovery. Currently, Coty carries a Zacks Rank #3 (Hold).
Top-Ranked Stocks
Nomad Foods Limited (NOMD - Free Report) manufactures, markets and distributes a range of frozen food products in the United Kingdom and internationally. It currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Nomad Foods' current fiscal-year sales and earnings implies growth of 5% and 7.3%, respectively, from the prior-year levels. NOMD delivered a trailing four-quarter earnings surprise of 3.2%, on average.
Mondelez International, Inc. (MDLZ - Free Report) manufactures, markets and sells snack food and beverage products in Latin America, North America, Asia, the Middle East, Africa and Europe. It presently carries a Zacks Rank of 2 (Buy). MDLZ delivered a trailing four-quarter earnings surprise of 9.8%, on average.
The Zacks Consensus Estimate for Mondelez International’s current financial-year sales indicates growth of 4.9% from the year-ago numbers.
Oatly Group AB (OTLY - Free Report) , an oatmilk company, provides a range of plant-based dairy products made from oats. It presently carries a Zacks Rank of 2. OTLY delivered a trailing four-quarter earnings surprise of 25.1%, on average.
The consensus estimate for Oatly Group’s current fiscal-year sales and earnings implies growth of 2.7% and 56.6%, respectively, from the year-ago figures.