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 revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in net income, expanding profit margins and growth in earnings per share. 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:
  • COH's revenue growth has slightly outpaced the industry average of 1.9%. Since the same quarter one year prior, revenues slightly increased by 3.8%. 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 1.41, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for COACH INC is currently very high, coming in at 74.90%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 23.45% significantly outperformed against the industry average.
  • 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 1.5% when compared to the same quarter one year prior, going from $347.50 million to $352.76 million.
  • COACH INC's earnings per share improvement from the most recent quarter was slightly positive. 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 ($3.70 versus $3.54).

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 $14.04 billion and is part of the consumer goods sector and consumer non-durables industry. The company has a P/E ratio of 13.8, below the S&P 500 P/E ratio of 17.7. Shares are down 9.2% 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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