¶ … Economy (Market) Analysis
Industry Analysis
Company Analysis
Brief History of the Company
Analysis of Financial Statements (Ratio analysis)
Liquidity Ratios: Current ratio
Operating Efficiency: Asset Turnover
Operating Profitability Ratios: Net profit margin, Return on Equity, and Du Pont
Risk Analysis: Business Risk and Financial Risk, Variability, and Debt/Equity
Application of CAPM and Analysis
10F.Estimating the Value of the Company and Analysis
EPS
10• P/E
11• Sustainable Growth Rate
11• PEG
12• Investment Decisions
13G.Additional Measures of Relative Value and Analysis
13• P/BV
14• P/CF
14H.Measures of Value Added and Analysis
14• EVA
15• MVA
15I.Comments and Conclusion
References:
1.Economy (Market) Analysis
Consumer spending proved very resilient against the challenge of gradually rising energy prices, as indicators of sales in the retail sector show. However, the difficulties caused by hurricanes Katrina, Rita and other tropical storms, as well as tensions in oil-rich areas might lead to record-high energy prices.
However, the retail sector in the Southeast was not very affected, especially in regard to its tangible assets: stores and means of transportation. The hurricane season is almost over, and the retailers hope to see an improvement in sales figures, especially because of the pressures all of them were subjected to this summer. After the fears caused by hurricane Katrina, the federal government took no chances and evacuated the population in affected areas, thereby making retailers with an important presence in the Southeast, such as Wal-Mart's (WMT), Dollar General (DG), Fred's (FRED), Family Dollar (FDO), and Dillard's (DDS). Fortunately, these problems are gradually solved.
2.Industry Analysis
The impact of the hurricane on oil and natural gas production and distribution will probably affect the retail sector some months from now on. Filling-up gas tanks and heating consumers' homes will definitely impact on the amounts available for spending in other sectors, and all retailers will definitely feel the pressure. In addition, transportation costs for all retail companies are subject to serious concerns.
High-end retailers such as (Coach COH), the object of this analysis, Neiman Marcus (NMG.A), Nordstrom (JWN) and Best Buy (BBY) are facing a serious test. High-energy prices related problems have plagued the industry during the previous few years, but the aforementioned companies have managed to get through the difficult periods without substantial difficulties, so no important slowdown should be expected. If, however, the stock price should happen to fall in some cases, that would probably be an opportunity to take advantage of, since prices will surely go up after a while.
The impact of high energy prices will have an impact on the results recorded by retailers throughout the year, and especially during the winter holydays, which are paramount for the industry. However, the impact will not probably be that significant, especially in the case of high-end retailers such as Coach, and all negative consequences should be on the short-term. Obviously, any short-term estimation of the price of COH shares is risky, since Coach might be under the influence of other factors. However, on the long-term, short-term phenomena such as the surge in energy costs will not influence substantially the value of the shares, which possess attractive growth potential.
Coach is an actor on the jewelry and accessories market, which has recorded increasing revenues during the last half of decade. Coach is one of the biggest players in the industry and has evolved alongside the market. Its earnings experienced rapid growth over the last few years, and that reflects in the value of the earnings per share indicator, which is now at record highs.
3.Company Analysis
A.Abstract
Coach is well-known for its high-quality, trendy designs, and managed to find a niche on the fiercely disputed market of moderate labels and designer brands. Coach gradually developed its brand and it currently faces little competition in the accessible luxury segment. This position represents a definite advantage for Coach, which will enable it to compete on the long-term with its present or future peers. Thanks to a financing structure based mainly on equity and to a low debt cost, the returns on invested capital exceed its cost of capital. Coach is currently expanding, takes advantage of all types of opportunities, both operational and financial, and has a strong position on the market because of its capacity to bring innovative products to consumers.
Coach is specialized in providing high-quality everyday accessories in variety of styles and materials. Among its products one could find wallets, handbags, footwear, watches and other accessories. More than half of its sales come from its U.S. retail stores...
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