Coach, Inc. (NYSE:COH)

Recent quarter indicates they are not dead yet. Quite the contrary. Looking for them to return to former highs.

Coach is a leader in the fashion industry, with a growing brand in the men's department

rebounding with great momentum

fstg experiment

Good run in this stock in April 2013. Time for a repeat performance!

Fundamental and technical pick. Pure technical timing for the original market entry: triangle bottom formation, almost a head and shoulders bottom, with low volume sell off on 25 Feb.

April 23, 2013 update: Nice broad base has formed, which could support a prolonged run up. Strong uptrend looks very promising: Could be the start of a nice ride up.

2.3% dividend, ~14 PE

I looked at the company website and see outrageous prices. I wouldn't buy their products, would you?

Coach is on the clearance rack this days, which presents a great opportunity for patient investors.

Their international focus is paying off. Coach grew NA revenues only 1% last year, but China revenues 40%. China's middle class is rapidly expanding and Coach's new CEO (Victor Luis) was previously head of international operations. This bodes well for further growth in Asia.

I like the credibility of management. They controversially deployed capital straight through the recession (their $240MM of CapEx from Jun '08-Jun'09 was their largest annual spend on record, significantly). This move was opportunistic - revenues shot back at a whiplash pace over the next three years.

Coach is continuing to invest in their business this year with focus on international operations. Critics continue to be skeptical, but I see it as another well-placed bet.

Dividend appreciation

long stock and options. saying growth will be back on track. that hurricane/storm hurt sales and they did not discount over the holiday which also hurt sales but not their status and that is why I think they will bounce. looking for 60 or so

In Jan-2010, the EPS was around $2. Today the LTM EPS is around 3.6, and is expected to incrrease at double digit rate in 2014 and 2015. By 2015, I expect PE to expand to 20, and EPS to hit >5, giving us atleast $100 share price. All while we collect >2% dividend to wait.

Biggest risk, are they losing the market share to MK? The good news is, in this segment, there is no single player that can rule. Consumers want variety. Even if Coach is no longer as cool among a small segment of it's customers, there is no reason it cannot become cool again.

Bottom line, at 14 PE, the risk is limited. If the growth returns, the PE will expand.

53% ROE and no debt worth worrying about.

P/E is 13.8, loaded with cash and no debt. Price beat up because mngmt lowered expectations.

Waiting for the fat pitch…that’s what the 20punches portfolio is all about.

For punch #7 (Q2 2013), we have a simple, consistent, high return, high quality business with a very strong brand, selling at a very pessimistic price.

Over the past decade, Coach (COH) has consistently maintained a profitability that is almost hard to comprehend. Coach was consistently among the top 1 or 2% most profitable companies in capitalism, over the past 10 years, with COH’s WORST annual return on capital being 38% in 2009. The ten year average is an astounding 46.1%, ranging between 38% and 57%. The company has zero debt and has about $3.16 per share in cash. Free cash flow as a % of shares has averaged over 20% over the past 10 years.

Since 2003, Sales per share have grown from $2.56 to $16.42 (20% annualized), EPS has grown from $$0.40 to $3.53 (24% annualized) , Free cash flow per share has grown from $0.44 to $3.51 (23% annualized)

Sales per square foot for Coach is #3 in the world behind Apple and Tiffany. See below:
http://static.seekingalpha.com/uploads/2011/8/24/saupload......

Since 2008, the company has bought back 18.8% of its outstanding shares, at an annualized rate of 4.1% annually since 2008. They also have a dividend yielding of about 2.4%. That dividend has been growing fast, doubling since 2010.

The bear case is that Michael Kors and others, are wearing down the "economic moat" that Coach has enjoyed for the past decade and that the past years of epic growth and profitability are over. While this may be the case, to a point, I find it hard to believe that it will happen so quickly, after so many years of consistent dominance. Castles arn't typically built in few months, nor are they destroyed in just a few months. (Unless were talking about tech companies) Despite competitive challenges, I think this brand will keep creating value for shareholders for the foreseeable future.

Coach (COH) has some of the best fundamentals you’re likely in a company.When I see a company of such outstanding quality, selling for less than 13x cash adjusted earnings, and a FCF/EV yield around 7.8%... I am compelled to buy it. I bought at $56, bought more at $51, and think that COH under $50 is a rare value opportunity, well worth one of my 20 punches. COH is my largest real life holding, and am confident that COH will outperform going forward.

Great brand, great balance sheet, still growing, very attractive entry price.

I bought yesterday at $48.00. I consider this a bargain for a company with such an outstanding track record of efficiency and profitability. ROIC has been consistently north of 40% over the past several years, and checked in at 56% last year; sales per square foot is close to $2,000 and ranks among the very best in the retail sector. Coach has a rock-solid balance sheet with a strong cash position and minimal long-term obligations; in fact, FCF generated last year alone adds up to about 80% of total liabilities on the balance sheet.

The valuation looks good right now: Price/Cash Flow is about 11.5, which is below the industry average of 16 and the company's own five year average of 15. The shares yield 2.4%, and the current dividend payout is only about 35% of free cash flow. Realistically, the shares could yield north of 4% in five years using the current price and applying a fairly conservative growth estimate to the dividend. The share count has also been in decline over the past few years.

I'm no fashion aficionado, but I think Coach has built a durable brand that will continue to command a premium price for the next several years.

Coach is one of the most famous luxury brands in the entire world. After having its share price pummeled over the last year all the way down to $48, it seems that Coach may be on a serious sale. Last year, Coach earned $4.8 billion and has been able to increase its top-line revenue each year for the last five years. In addition, Coach has been able to grow its net income every year with net income in 2012 being $1,039,000,000. This has now given Coach a P/E of only 13.6 on $3.63 EPS despite a 2.48% dividend yield (which helps to defend against shorts) as well as proven growth throughout the years. In comparison, the average P/E in the retail industry that Coach competes in is a significantly higher 18.7. This means Coach could technically be fairly valued at around $67 if Coach were to increase to industry averages.

Besides the technical points, Coach has a famous brand. Every girl (and increasingly some men) know what Coach is and what it stands for. Coach bags are the envy of any girl in the room as many of them go for $400+. Despite the high price, women are more than willing to pay the price if they can (or even if they can't sometimes). As I hinted at earlier, men's lines are expected to grow significantly as well at Coach with some estimates putting the growth in the men's lines at as much as 50% in the next year.

It is also important to consider Coach's increasing dominance in Asia. Coach has been able to grab market share in the luxury goods sector of Asia with ease. If I remember correctly, the international sector of Coach experienced an 11% increase last year.

Also, Coach is trying to expand its accessibility to the middle class by opening further outlet stores. So far, foot traffic has increased and more products are being sold.

Lastly, it is important to consider that Coach's management is considered by many to be top-notch. They have managed to guide the company with little to no debt while growing the company every year and becoming increasingly competitive in the global markets.

For these reasons, I recommend Coach as outperforming for the next five year time frame.

Solid financials, low debt, high FCF, strong market image and room for growth both at home and abroad.

good fundamentals, strong profitability, cheap on enterprise multiple basis