Coach Inc. is suitable for the Enterprising Investor, but not the Defensive Investor, who is concerned with the lack of dividends and the high PB ratio. The Enterprising Investor, on the other hand, has no initial concerns. As a result, the Enterprising Investor should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.
From a valuation side of things, the company has grown its EPSmg (normalized earnings) from $2.38 in 2011 to only an estimated $2.68 for 2015. This demonstrated growth does not support the market’s implied estimate of 2.76%. As a result, the ModernGraham valuation model returns an estimate of intrinsic value below the market price at this time, and the company appears to be overvalued by the market.
Be sure to check out previous ModernGraham valuations of Coach Inc. (COH) for greater perspective!
Disclaimer: The author held a long position in Coach Inc. (COH) at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.