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Trade-Ideas: Coach (COH) Is Today's "Storm The Castle" 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 "storm the castle" (crossing above 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 $197.4 million.
  • COH has traded 3.8 million shares today.
  • COH is trading at 2.23 times the normal volume for the stock at this time of day.
  • COH crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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 2.6%. COH has a PE ratio of 14.4. Currently there are 9 analysts that rate Coach a buy, no analysts rate it a sell, and 15 rate it a hold.

The average volume for Coach has been 3.8 million shares per day over the past 30 days. Coach has a market cap of $14.6 billion and is part of the consumer goods sector and consumer non-durables industry. The stock has a beta of 0.98 and a short float of 7.4% with 5.47 days to cover. Shares are down 5.5% year to date as of the close of trading on Tuesday.

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 largely solid financial position with reasonable debt levels by most measures, expanding profit margins 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 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. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.46, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for COACH INC is currently very high, coming in at 71.83%. Regardless of COH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, COH's net profit margin of 18.93% compares favorably to the industry average.
  • COACH INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings 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. For the next year, the market is expecting a contraction of 4.7% in earnings ($3.45 versus $3.62).
  • COH, with its decline in revenue, slightly underperformed the industry average of 7.0%. Since the same quarter one year prior, revenues slightly dropped by 0.9%. Weakness in the company's revenue seems to not be hurting the bottom line, shown by stable earnings per share.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. 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.

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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