The Cooper Companies Inc (COO, Financial) recently experienced a daily loss of 2.88% and a 3-month decline of 4.29%, yet it boasts an Earnings Per Share (EPS) of 5.53. Investors may ponder whether these figures suggest that the stock is significantly undervalued. To answer this, we delve into a valuation analysis that could provide insights into the true value of The Cooper (COO). Read on as we explore the financial strength and potential of this intriguing company.
Company Introduction
The Cooper Companies Inc (COO, Financial), a major player in the U.S. eye care industry, operates through two segments: CooperVision and CooperSurgical. CooperVision is a leader in the contact lens market with a suite of products that address various visual needs, while CooperSurgical focuses on reproductive, fertility, and women's health devices. With a current stock price of $335 and a GF Value of $480.18, The Cooper appears to be significantly undervalued, suggesting a potential opportunity for investors. The following analysis aims to shed light on the fair value of The Cooper, integrating financial metrics with an overview of the company's operations.
Summarize GF Value
The GF Value is a proprietary measure that estimates the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance projections. When a stock's price is well below the GF Value Line, it is often considered undervalued and may promise higher future returns. The Cooper, with a market cap of $16.60 billion, seems to be in such a position, trading below its estimated fair value. This indicates that the stock could offer substantial long-term returns that outpace its business growth.
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Financial Strength
Investing in companies with robust financial strength is crucial to avoid the risk of capital loss. The Cooper's cash-to-debt ratio of 0.05 places it lower than 95.71% of its peers in the Medical Devices & Instruments industry, suggesting a need for caution. However, its overall financial strength is rated a fair 6 out of 10 by GuruFocus, pointing to a stable balance sheet.
Profitability and Growth
A hallmark of a less risky investment is consistent profitability. The Cooper has demonstrated this with a decade of profits. With an annual revenue of $3.50 billion and an operating margin of 14.84%, it outperforms 76.24% of its industry counterparts, earning a strong profitability rank of 9 out of 10. However, growth is also a vital factor. The Cooper's 3-year average annual revenue growth rate of 7.8% is higher than 51.45% of its industry peers, but its EBITDA growth rate lags behind, ranking lower than 60.58%. This mixed growth performance warrants a closer look by investors.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can reveal its value creation efficiency. The Cooper's ROIC of 3.38 is below its WACC of 9.72, indicating that it may not be generating sufficient cash flow relative to the capital invested. This comparison is a critical aspect of assessing the company's profitability.
Conclusion
Overall, The Cooper (COO, Financial) stock appears to be significantly undervalued. With a fair financial condition and strong profitability, it presents an interesting case for investors. However, its growth ranking and the ROIC vs WACC comparison highlight areas that could be improved. For a more comprehensive understanding of The Cooper's financials, interested parties can view its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
