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Coach, Inc. (COH): This Fashion Designer Is Cheap, But Should You Jump In?

Alternatives: Ralph Lauren and Michael Kors

There are several alternatives to Coach, and they represent a wide range of growth and stability.

Ralph Lauren Corp (NYSE:RL) is on the “stability” end of the spectrum. The company offers a complete product line, and has its largest growth opportunity in international markets, with just 37% of the company’s sales coming from outside of the U.S. currently. Ralph Lauren Corp (NYSE:RL) has stated that their long-term goal is to increase its European and Asian business to the point where each contributes one-third of the company’s total sales. This is ambitious to say the least, and Ralph Lauren Corp (NYSE:RL) seems to be content to grow their business slowly and steadily.

Michael Kors Holdings Ltd (NYSE:KORS), on the other hand, is definitely a growth story. The company’s sales have more than quintupled in the last 5 years, and grew by 67% in the last year alone. Products made by the company, particularly their watches, have become a major fashion trend over the past several years. Unlike Coach, Inc. (NYSE:COH), Michael Kors Holdings Ltd (NYSE:KORS)’ products have not come close to maxing out their growth potential yet, so shares are priced based on what the company could become, not what it is now. With shares trading for 31.8 times TTM earnings, this is certainly the biggest gamble of the group.

Final thoughts

I believe that Coach, Inc. (NYSE:COH) is a great combination of stability and growth and is more than fairly valued at the current share price. Having said that, my attitude towards Coach’s earnings announcements is to wait and see what happens. Who knows, a relatively significant earnings miss could easily create an even better entry point for us!

The article This Fashion Designer Is Cheap, But Should You Jump In? originally appeared on Fool.com and is written by Matthew Frankel.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Coach. The Motley Fool owns shares of Coach. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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