Financial Analysis: Coty (NYSE:COTY) and Honest (NASDAQ:HNST)

Honest (NASDAQ:HNST) and Coty (NYSE:COTY) are both consumer staples companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, valuation, earnings, analyst recommendations, risk, institutional ownership and dividends.

Volatility & Risk

Honest has a beta of 2.12, indicating that its share price is 112% more volatile than the S&P 500. Comparatively, Coty has a beta of 0.97, indicating that its share price is 3% less volatile than the S&P 500.

Earnings and Valuation

This table compares Honest and Coty”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Honest	$371.32 million	1.39	-$15.69 million	($0.11)	-42.73
Coty	$5.89 billion	0.40	-$367.90 million	($0.62)	-4.31

Honest has higher earnings, but lower revenue than Coty. Honest is trading at a lower price-to-earnings ratio than Coty, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current recommendations and price targets for Honest and Coty, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Honest	2	4	2	1	2.22
Coty	3	13	1	0	1.88

Honest currently has a consensus target price of $4.84, indicating a potential upside of 2.98%. Coty has a consensus target price of $3.70, indicating a potential upside of 38.71%. Given Coty’s higher probable upside, analysts clearly believe Coty is more favorable than Honest.

Institutional and Insider Ownership

45.5% of Honest shares are owned by institutional investors. Comparatively, 42.4% of Coty shares are owned by institutional investors. 9.4% of Honest shares are owned by company insiders. Comparatively, 5.9% of Coty shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Profitability

This table compares Honest and Coty’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Honest	-3.56%	4.31%	3.33%
Coty	-9.20%	4.59%	1.47%

Summary

Honest beats Coty on 11 of the 15 factors compared between the two stocks.

About Honest

The Honest Company, Inc. manufactures and sells diapers and wipes, skin and personal care, and household and wellness products. The company also offers baby clothing and nursery bedding products. It sells its products through digital and retail sales channels, such as its website and third-party ecommerce sites, as well as brick and mortar retailers. The company was incorporated in 2012 and is headquartered in Los Angeles, California.

About Coty

Coty Inc., together with its subsidiaries, manufactures, markets, distributes, and sells beauty products worldwide. It operates through Prestige and Consumer Beauty segments. The company provides fragrance, color cosmetics, and skin and body care products. It offers Prestige segment products primarily through prestige retailers, including perfumeries, department stores, e-retailers, direct-to-consumer websites, and duty-free shops under the Burberry, Calvin Klein, Chloe, Davidoff, Escada, Gucci, Hugo Boss, Jil Sander, Joop!, Kylie Jenner, Lancaster, Marc Jacobs, Miu Miu, Orveda, philosophy, SKKN BY KIM, and Tiffany & Co. brands. The company provides Consumer Beauty segment products primarily through hypermarkets, supermarkets, drug stores, pharmacies, mid-tier department stores, traditional food and drug retailers, and e-commerce retailers under the Adidas, Beckham, Biocolor, Bozzano, Bourjois, Bruno Banani, CoverGirl, Jovan, Max Factor, Mexx, Monange, Nautica, Paixao, Rimmel, Risque, and Sally Hansen brands. It also sells its products through third-party distributors. The company was founded in 1904 and is headquartered in New York, New York. Coty Inc. is a subsidiary of JAB Beauty B.V.