Cooper Companies (COO) Nears Earnings, Is The Stock Cheap After The Recent Slide?
Anticipation around Cooper Companies (COO) earnings on Wednesday is driving fresh attention, as investors weigh last quarter’s outperformance against expectations for a slower 3.5% revenue expansion year on year this time.
The Cooper Companies share price has softened recently, with a 1-day move down 1.49% and a 1-month share price return down 6.25%, while the year-to-date share price return is down 14.2% and the 1-year total shareholder return is a modest 1.96%, indicating weakening momentum as investors reassess growth expectations ahead of earnings.
Compare Cooper Companies’ setup before earnings with a curated list of other healthcare stocks showing resilient fundamentals using the list of solid balance sheet and fundamentals (24 results).
Cooper Companies runs a sizeable, growing medical devices business, yet the share price has slipped and long term returns have been weak. Is this a strong franchise that is temporarily marked down, or fairly valued for its risks?
Most Popular Narrative: 13.6% Undervalued
Against a last close of $69.59, the most followed narrative for Cooper Companies points to a fair value of $80.57 and frames that gap through earnings power and cash generation under a 7.85% discount rate.
Free cash flow is poised to inflect higher as a multi-year capital expenditure cycle winds down following the ramp-up of MyDAY capacity, with management guiding for approximately $2 billion in free cash flow over the next three years. This improved cash generation, tied to strong cost discipline and revenue momentum, will further benefit shareholders via debt reduction and share repurchases.
Want to see what underpins that fair value gap for Cooper Companies? The core of this narrative is a shift in profitability, accelerating earnings growth, and a leaner share count that all have to line up just right.
If you want to cross check this story before earnings, it helps to see how those growth, margin, and buyback assumptions stack against other healthcare businesses with sturdy finances by reviewing the list of solid balance sheet and fundamentals (24 results).
Result: Fair Value of $80.57 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
Still, two pressure points could derail that Cooper Companies narrative: slower contact lens market growth and prolonged weakness in fertility and Paragard pulling on group earnings.
Find out about the key risks to this Cooper Companies narrative.
Another View On Cooper Companies’ Valuation
The SWS DCF model paints a very different picture for Cooper Companies. On that framework, the shares trade at a 52.3% discount to an estimated fair value of $145.99, which is a much steeper gap than the $80.57 narrative fair value. Which reference point do you trust when the spread is this wide?
Look into how the SWS DCF model arrives at its fair value.
Next Steps
This mix of optimism and concern around Cooper Companies can feel messy, so move quickly, review the numbers, and weigh the 2 key rewards and 1 important warning sign.
Looking for more ideas beyond Cooper Companies?
Do not stop your research with Cooper Companies alone, because a broader watchlist can reveal opportunities you would otherwise never see.
- Spot potential mispricings early by scanning the 49 high quality undervalued stocks that combine solid fundamentals with compressed expectations.
- Prioritise resilience by reviewing the 83 resilient stocks with low risk scores focused on companies with sturdier financial profiles and lower risk scores.
- Hunt for less crowded opportunities by checking the 17 high quality undiscovered gems where quality fundamentals have not yet attracted broad attention.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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