Amit Wadhwaney of Moerus Capital Management presented his investment thesis on Natura Cosméticos (Brazil: NATU3) at Best Ideas 2026.
Thesis summary:
Natura is a Brazilian beauty and personal care company that dominates its home market, the fifth-largest globally, through a direct-selling model that emphasizes natural ingredients and sustainable sourcing. The company historically generated strong returns by focusing on Latin America, where it commands leading market share and leverages a network of 3.2 million consultants. However, a series of debt-funded acquisitions between 2013 and 2019 — Aesop, The Body Shop, and Avon — strained the balance sheet and diverted management attention from the core business. These missteps, compounded by macro challenges in key markets like Brazil and Argentina and the loss of Russian revenue, drove the stock to multi-year lows.
Amit argues that the recent valuation obscures the resilience and profitability of the legacy Natura brand. Management has moved aggressively to repair the balance sheet by divesting Aesop and The Body Shop, effectively eliminating net debt. The problematic Avon acquisition is being restructured, with the international non-LatAm operations separated and the Latin American integration proceeding, albeit with short-term integration costs. The core Natura business in Brazil continues to perform well, with underlying margins around 19.5%, suggesting that once the “noise” of restructuring and write-downs subsides, the company’s earnings power will become visible.
The thesis relies on a return to the company’s “circle of competence”—direct selling in Latin America—under new leadership and committed controlling shareholders. While the integration of Avon in Latin America presents execution risks, early signs of stabilization appeared in 2024 EBITDA results. The expectation is that as restructuring costs abate and macroeconomic headwinds in Brazil and Argentina potentially ease, the company will resume its historical trajectory of product innovation and profitability. The severe stock price decline reflects a “broken growth” narrative, but the underlying asset remains a dominant regional player with strong brand equity and a now-repaired balance sheet.
Regarding valuation, the shares recently traded at approximately 5.5x consensus 2025 EBITDA, a steep discount compared to global peers averaging around 18.8x and emerging market peers like AmorePacific at 10.5x. Even adjusting for the potential jettisoning of Avon, the core Natura business is valued at roughly 6.2x estimated normalized EBITDA. This valuation implies little to no credit for the turnaround or the inherent quality of the Natura franchise, offering a margin of safety for investors willing to look past near-term earnings volatility.
Disclaimer
Best Ideas 2026 was held from January 6-23, 2026. The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.
Slides
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