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, growth in earnings per share, expanding profit margins and increase in net income. 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 5.2%. Since the same quarter one year prior, revenues slightly increased by 7.1%. 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. To add to this, COH has a quick ratio of 1.80, which demonstrates the ability of the company to cover short-term liquidity needs.
  • COACH INC has improved earnings per share by 9.1% 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 ($3.73 versus $3.54).
  • The gross profit margin for COACH INC is currently very high, coming in at 74.10%. 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 20.11% compares favorably to the industry average.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Textiles, Apparel & Luxury Goods industry average, but is greater than that of the S&P 500. The net income increased by 6.2% when compared to the same quarter one year prior, going from $225.00 million to $238.93 million.

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 $16.2 billion and is part of the consumer goods sector and consumer non-durables industry. The company has a P/E ratio of 16.00, below the S&P 500 P/E ratio of 18.00. Shares are up 3.4% 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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