Natura Cosméticos: Unmasking Core Value Amid Restructuring Noise

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 macroeconomic 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 current 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 again.

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.

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About the instructors:

Amit Wadhwaney is a Portfolio Manager and Co-Founding Partner at Moerus Capital Management LLC, and the founding manager of the Moerus Worldwide Value Fund. Mr. Wadhwaney has over 30 years of experience researching and analyzing investment opportunities in developed, emerging, and frontier markets worldwide, and has managed global investment portfolios since 1996. Prior to founding Moerus, Mr. Wadhwaney was a Portfolio Manager and Partner at Third Avenue Management LLC. Mr. Wadhwaney founded the international business at Third Avenue and was the founding manager of the Third Avenue Global Value Fund, LP, the Third Avenue Emerging Markets Fund, LP, and the Third Avenue International Value Fund. Earlier in his career, Mr. Wadhwaney was first a securities analyst, and then Director of Research at M.J. Whitman LLC, a New York-based broker-dealer. Prior to joining M.J. Whitman, Mr. Wadhwaney was a paper and forest products analyst at Bunting Warburg, a Canadian brokerage firm. He began his career at Domtar, a Canadian forest products company. Mr. Wadhwaney holds an M.B.A. in Finance from The University of Chicago. He also holds a B.A. with honors and an M.A. in Economics from Concordia University; at Concordia, he was awarded the Sun Life Prize and the Concordia University Fellow in Economics, and he subsequently taught economics classes there. He also holds B.S. degrees in Chemical Engineering and Mathematics from the University of Minnesota.