NEW YORK (TheStreet) -- Coach (COH) shares are flat at $36.49 in pre-market trading today after the luxury accessories manufacturer had coverage started with a "neutral" rating by analysts at Mizuho Securities on Monday.
The firm also set a $34 price target on the company's shares which represents a potential 6.8% downside from the stock's current price.
Coach shares benefited last week from rumors that rival LVMH (LVMHF) was considering acquiring the company, though the Louis Vuitton brand maker has not commented on those reports. Coach shares went up as much as 8% last week following the news, a reversal from the 30% decline the struggling company has seen during the rest of the year.
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TheStreet Ratings team rates COACH INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate COACH INC (COH) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- COH's debt-to-equity ratio is very low at 0.07 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 1.37, which illustrates the ability to avoid short-term cash problems.
- The gross profit margin for COACH INC is currently very high, coming in at 73.32%. 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 11.46% compares favorably to the industry average.
- COACH INC's earnings per share declined by 44.1% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, COACH INC reported lower earnings of $2.78 versus $3.62 in the prior year. For the next year, the market is expecting a contraction of 32.7% in earnings ($1.87 versus $2.78).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income has significantly decreased by 45.3% when compared to the same quarter one year ago, falling from $217.88 million to $119.10 million.
- You can view the full analysis from the report here: COH Ratings Report