Coach, Inc. (COH)

TMFdatabasebob (99.02) Submitted: 5/14/08 10:25 PM : Start Price: $37.50 COH Score: -10.31

Looking at the Value Line page for Coach, the thing that jumps out at me is consistent growth. Well... maybe not in the share price, but certainly in the business.

Certainly, Coach's growth has slowed of late - from bottom line mid-40% growth to merely 20% earnings growth expectations going forward. But a PE of ~17.5 seems low for the growth that remains. Every year since 2002, Coach has increased sales, cash flow, and earnings. It is easy to agree with the bear's growl that the credit crunch will stop Coach's growth. But - fact is - it hasn't. Even if it turns out to hurt Coach a little, Coach has the finances to weather the storm - they're not debt-free, but the amount of debt they carry is ridiculously small.

Value Line suggests that COH stock could be worth $80-115 in three-to-five year's time. They see cash flow of $4.55 in that time frame, and think a 22 cash flow multiple is an approprate fair value for the stock (they see this year's cash flow at $2.55, by the way). If they're right, the 3-5 year range represents more than a double to slightly more than a triple from today's price ($37.05).

Although I don't personally own shares, I see a favorable risk/reward ratio here - certainly worth a bet in CAPS, and worth considering for one's personal portfolio.

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