I have noticed that the financial press has been looking favorably upon Ron Perelman’s Revlon stock, with even Barron’s describing “Revlon’s Beautiful Outlook.” The general argument in favor of Revlon is that its core beauty product lines seem recession-resistant, and it seems to be trading at a lower valuation than its peers Estee Lauder, Coty, and L’Oreal. At first glance, Revlon might seem like a worthwhile stock to consider.
As you can already guess, I don’t see it that way.
First, you should be aware of Revlon’s disastrous trading history. You might see the current price of $32 per REV share and compare it to the $24 IPO in 1996 and think: “Ok, so it hasn’t done much for shareholders.” The reality is far worse because Revlon executed a 1-for-10 reverse stock split in 2008. So, really, the effective price is $3.20 per share if you follow the reconfiguration of the equity structure. As a result, every $1,000 invested into Revlon back in 1996 would be worth only $124 today.