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The stock is down $25.53 (-32%) from the 52-week high of $79.70. Does that mean that earnings have been bad? Fiscal year 2012 (ended June 30, 2012) came in at $3.53, an all-time record. The first quarter was up 5.5% from a year ago.
The company is net debt free. Dividends were initiated in 2009 and raised each year since. The current quarterly payout is 30 cents for a yield of 2.22%.
That’s the highest ever on this remarkable growth stock. A look at their past 10 years tells you just how well Coach has performed.
Coach suffered its only down year in fiscal year 2009 due to the Great Recession. EPS dipped all of 7.3% (from $2.06 to $1.91). Buyers who bought during the second half of that decline snared a triple in one year and an ultimate shot at 600% gains.
Shoppers that would die to buy Coach merchandise at one-third off are passing up pretty much that same discount on the shares.
The only way to get great values on high-quality stocks is to buy when things look temporarily depressed.
If you are worried about being too early, consider this 13-month combination buy/write out to January 2014.
I was a buyer of Coach shares today.
Disclosure: Long Coach shares
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Coach look like a great company, no debt, ~ 55% RoIC, ~$1b in FCF but quite frankly it is expensive. The price reflects 11% growth rate in the next 10 years, 4% terminal growth rate with discount of 12%.
If it is not expensive, it is not cheap either.
I would feel more safe buying around $45.