Are Avon’s Shares Overvalued?

Shares in cosmetics maker Avon Products Inc. could be overvalued in light of slower unit sales and an ominous lawsuit filed on behalf of its door-to-door sales representatives, according to a story in the Jan. 19 edition of Barron’s. Avon, the world’s largest direct-marketer of beauty products, reported 3% unit sales growth in the third quarter of 2003, compared to close to 13% a year earlier.

Furthermore, a lawsuit seeking class-action status indicates that those numbers could be manipulated, the newspaper said. Filed on behalf of sales representatives, the suit says the company shipped products to a former representative in California who did not order them, and then failed to credit her when she returned the products, the newspaper said.