Coach Inc. Stock Buy Recommendation Reiterated (COH)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK (TheStreet) -- Coach (NYSE:COH) has been reiterated by TheStreet Ratings as a buy with a ratings score of B . The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

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Highlights from the ratings report include:

• COACH INC has improved earnings per share by 5.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, COACH INC increased its bottom line by earning $3.54 versus $2.93 in the prior year. This year, the market expects an improvement in earnings ($3.86 versus $3.54).
• The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry average. The net income increased by 3.0% when compared to the same quarter one year prior, going from $214.98 million to $221.38 million.
• Despite its growing revenue, the company underperformed as compared with the industry average of 10.6%. Since the same quarter one year prior, revenues rose by 10.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
• COH's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.28, which illustrates the ability to avoid short-term cash problems.
• The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, COACH INC's return on equity significantly exceeds that of both the industry average and the S&P 500.

Coach, Inc. engages in the design, marketing, and distribution of handbags, accessories, wearables, footwear, jewelry, sunwear, travel bags, watches, and fragrances for women and men in the United States and internationally. Coach has a market cap of $16.24 billion and is part of the consumer goods sector and consumer non-durables industry. The company has a P/E ratio of 16, below the S&P 500 P/E ratio of 17.7. Shares are down 6.7% year to date as of the close of trading on Friday.

You can view the full Coach Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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For more information on Coach Inc. click any of the following:

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• Coach Inc. Growth Rates

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• Coach Inc. Cash Flow

• Coach Inc. Income Statement