Coach, Inc. (COH), Michael Kors Holdings Ltd (KORS): A Premium Company in the Bargain Bin

Coach, Inc. (NYSE:COH) is also going through a transformation, restructuring operations and implementing managerial changes. This can always carry some risks, and it may slow the company for a while until the reorganization is complete. But at the same time, it can be a powerful way to reinvigorate growth for years to come.

In the Bargain Bin

When comparing valuation ratios and profitability margins for Coach versus industry peers like Michael Kors Holdings Ltd (NYSE:KORS) and Ralph Lauren, the company is looking quite attractive. Coach is the cheapest company in the group in terms of P/E ratio and dividend yield, and it also has higher gross and operating margins than its competitors.

The company recently announced a dividend increase of 12.5%, bringing the payment to $0.3375 per share. Coach has been regularly raising dividends over the last years, and the company´s financial strength is out of question, so investors have good reasons to expect growing cash distributions from Coach over the next years.

Bottom Line

Coach, Inc. (NYSE:COH) is being hurt by the competition, and that´s a problem the company needs to address as soon as possible. On the other hand, current valuation is already reflecting those hurdles, and Coach is expanding into new and promising areas for growth. This premium company at a discounted price is looking like a long term opportunity.

The article A Premium Company in the Bargain Bin originally appeared on Fool.com and is written by Andrés Cardenal.

Andrés Cardenal owns shares of Coach. The Motley Fool recommends Coach. The Motley Fool owns shares of Coach. Andrés is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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