Critical Review: Coty (NYSE:COTY) and Shiseido (OTCMKTS:SSDOY)

Shiseido (OTCMKTS:SSDOY) and Coty (NYSE:COTY) are both mid-cap consumer staples companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, dividends, valuation, earnings, risk, analyst recommendations and profitability.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Shiseido and Coty, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Shiseido	0	1	0	0	2.00
Coty	4	15	3	0	1.95

Coty has a consensus price target of $6.06, suggesting a potential upside of 52.92%. Given Coty’s higher probable upside, analysts plainly believe Coty is more favorable than Shiseido.

Valuation & Earnings

This table compares Shiseido 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
Shiseido	$6.55 billion	1.04	-$68.94 million	($0.02)	-854.50
Coty	$5.89 billion	0.59	-$367.90 million	($0.44)	-9.01

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Shiseido	-0.10%	-0.15%	-0.07%
Coty	-6.24%	5.18%	1.70%

Dividends

Shiseido pays an annual dividend of $0.17 per share and has a dividend yield of 1.0%. Coty pays an annual dividend of $0.50 per share and has a dividend yield of 12.6%. Shiseido pays out -850.0% of its earnings in the form of a dividend. Coty pays out -113.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Volatility & Risk

Shiseido has a beta of 0.42, meaning that its share price is 58% less volatile than the S&P 500. Comparatively, Coty has a beta of 1.98, meaning that its share price is 98% more volatile than the S&P 500.

Institutional and Insider Ownership

0.0% of Shiseido shares are owned by institutional investors. Comparatively, 42.4% of Coty shares are owned by institutional investors. 5.9% of Coty shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Summary

Coty beats Shiseido on 9 of the 16 factors compared between the two stocks.

About Shiseido

Shiseido Company, Limited engages in the production and sale of cosmetics in Japan and internationally. The company offers fragrances; and skincare and makeup products. It also engages in the restaurant and food, and retail businesses; and operates beauty salons. In addition, the company operates and supports SABFA, a professional hair makeup training school. Further, it offers childcare facilities. The company sells its products through department, specialized cosmetic, drug, and general merchandise stores. Shiseido Company, Limited was founded in 1872 and is headquartered in Tokyo, Japan.

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.