Despite economic woes, cash-strapped consumers, and forecasts for a dismal holiday retail season, value investor Charles Mizrahi still sees value for long-term investors in high-end retailer Coach (NYSE: COH).
The editor of Hidden Values Alert explains, "Founded in 1941, Coach has grown from a family-run workshop in a Manhattan loft to a leading American marketer of fine accessories and gifts for women and men.
"Coach is one of the most recognized fine accessories brands in the United States and in targeted international markets. Its modern, fashionable handbags and accessories use a broad range of high-quality leathers, fabrics and other materials.
"The company has created a sophisticated, modern and inviting environment to showcase its product assortment and to reinforce a consistent brand position wherever the consumer may shop.
"Coach utilizes a flexible, cost-effective global sourcing model in which independent manufacturers supply Coach products, allowing the company to bring its broad range of products to market rapidly and efficiently.
* The company has no long-term debt.
* Return on equity is more than 50%.
* Net profit margins have consistently been in the 20%+ range over the past four years.
* Free cash flow/revenue is 23%, which means that for every $1 in sales, 23¢ falls to the bottom line.
"COH is a good company, and a price of $20 or less per share represents a very good value. If COH can grow earnings at 15% per annum and maintain a P/E of 10, the stock will handsomely reward investors in the next five years."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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