Coach (COH) is no stranger to our community of investors, currently ranked #18 in the MANIFEST 40. The projected annual return (PAR) is 18.6% with a top-shelf quality rating of 93.6.
Coach has grown from a family-run workshop in a Manhattan loft to a leading American marketer of fine accessories and gifts for women and men. Coach is one of the most recognized fine accessories brands in the U.S. and in targeted international markets. Premium lifestyle accessories are offered to a loyal and growing customer base and provide consumers with fresh, relevant and innovative products that are extremely well made, at an attractive price.
Coach’s modern, fashionable handbags and accessories use a broad range of high quality leathers, fabrics and materials. In response to customer demands for both fashion and function, Coach offers updated styles and multiple product categories which address an increasing share of customer accessory wardrobes. Coach has created a sophisticated, modern and inviting environment to showcase product assortment and reinforce a consistent brand position wherever the consumer may shop.
Coach utilizes a flexible, cost-effective global sourcing model, in which independent manufacturers supply products, allowing a broad range of products to market rapidly and efficiently.
Business Model Analysis
Starting with the top line (revenues or sales) the long-term trend is very steady for a specialty retailer. There’s a slight disruption during the 2008-2009 Great Recession but less than many retail companies. The regression shown here suggests a long-term sales growth forecast of 12-13%
The current Value Line low total return (LTR) forecast shown here is 12%.
Profitability Analysis
Historical net margins for Coach (COH) have ranged from 19-25% and the impact of the 2008-2009 Great Recession is clear. Based on the trend shown here, we’re using a projected net margin of 20.5% for the long-term forecast.
The EPS stability ranking of 83 is actually pretty high — considering the industry and competition faced by Coach.
Valuation & Return Forecast
The P/E ratio for Coach has ranged from 11-26.5x with the 11x experienced on the “tail” of the Great Recession. Value Line has a 3-5 year projected average P/E of 18x and the consensus P/E that we’re using is 18×. The return forecast (PAR) is 18-19% based on these growth, profitability and valuation assumptions.
Coach has been a frequent selection over the last several weeks for the Core Diem Demonstration Portfolio.
Expecting Alpha 
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