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COH: valued at $104.62 by highflight1985
Posted by: highflight1985 (IP Logged)
Date: September 13, 2013 04:13AM
Voted $104.62 based on $3.62 in earnings, growing 15% for ten years, with an expected future PE of about 29 (would only consider selling if it became "overvalued," and a 29 PE to me is overvalued), giving it a future price of about $423. Discounted back to today at a 15% minimum acceptable rate of return, and you get a fair price of $104.62. Adding a 50% MOS (in case my valuation is off and/or future growth doesn't go quite as expected), I'd consider buying at $52.31. Given how close it is today to that price, I could use options strategies to quickly (darn near immediately) reduce my initial buy in price (cost basis) to less than this. An analysis of their free cash flow will show that if you were to buy the whole company today with a market cap of $15.190B, you'd recover your investment in just over 8 years. Considering that private companies sell for 5-8 times earnings, you are able to buy this public company today at a reasonable private company price. Additionally, your purchase would come along with great management and a durable competitive advantage (their brand). Throw in option premiums from selling-to-open puts and covered calls, dividends, share buybacks, and smartly-timed dollar cost averaging on price dips below the above MOS price, and you could greatly reduce the recovery time. In summary, I don't think you'd go broke buying this company today.
Stocks Discussed: COH,
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