Ask Matt: Will Revlon be prettier with Elizabeth Arden?

Q: Will Revlon be prettier with Elizabeth Arden?

A: Revlon (REV) is trying to pretty itself up by buying cosmetics company Elizabeth Arden (RDEN). While the deal may make business sense, Revlon remains a speculative stock that’s too risky for most investors.

Revlon, a New York-based personal care products seller, paid nearly $900 million including debt for Elizabeth Arden. The aim is to help Revlon broaden its offerings. Elizabeth Arden has a broad product lineup of mostly high-end cosmetics ranging from skin care to perfume. Revlon is betting the deal will make it a larger global player in a number of areas.

Investors are hoping this deal can be what finally turns Revlon’s stock around. Shares of Revlon jumped nearly 10% Friday following the deal announcement to $34.11. Revlon’s stock is up 29% this year, although it’s still down more than 7% over the past 12 months. The company could use an injection of growth. Revlon’s revenue over the past 12 months is essentially flat from the same year-earlier period. Meanwhile, Revlon is carrying a heavy load of $1.8 billion in long-term debt, which is roughly equal to the value of the company’s assets. But since the stock is barely covered by Wall Street, it’s difficult to get good earnings estimates.

Paste BN markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.