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Trade-Ideas: Coach (COH) Is Today's "Roof Leaker" Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Coach ( COH) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified Coach as such a stock due to the following factors:

  • COH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $156.3 million.
  • COH has traded 116,624 shares today.
  • COH is trading at 1.71 times the normal volume for the stock at this time of day.
  • COH crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in COH with the Ticky from Trade-Ideas. See the FREE profile for COH NOW at Trade-Ideas

More details on COH:

Coach, Inc. designs and markets bags, accessories, business cases, footwear, wearables, jewelry, sunwear, travel bags, watches, and fragrances for women and men in the United States and internationally. The stock currently has a dividend yield of 2.4%. COH has a PE ratio of 15.3. Currently there are 13 analysts that rate Coach a buy, no analysts rate it a sell, and 14 rate it a hold.

The average volume for Coach has been 3.1 million shares per day over the past 30 days. Coach has a market cap of $15.6 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 1.29 and a short float of 6.4% with 6.25 days to cover. Shares are down 0.2% year to date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Coach as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • COH's revenue growth has slightly outpaced the industry average of 3.7%. Since the same quarter one year prior, revenues slightly increased by 5.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • COH's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, COH has a quick ratio of 1.81, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for COACH INC is currently very high, coming in at 76.84%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 18.10% is above that of the industry average.
  • Net operating cash flow has increased to $374.57 million or 32.43% when compared to the same quarter last year. In addition, COACH INC has also modestly surpassed the industry average cash flow growth rate of 22.68%.
  • COACH INC's earnings per share declined by 9.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, COACH INC increased its bottom line by earning $3.62 versus $3.54 in the prior year. This year, the market expects an improvement in earnings ($3.78 versus $3.62).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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