I agree, business is going great, operating margin up, return on the capital employed they provided was up, debt is down and business is growing nicely around 10% PA.
However, what is not right is the valuation. The stock is trading at 45 times FY18 earnings and offered a diabolical FY19 guidance of 8-12% growth. That is why the stock went down! Surely this will be downgraded by brokers soon enough with lower price targets to reflect this. Remember, it's already on the nose of some brokers for being overvalued before that guidance miss. Defensive earnings, USD exposure and big competitive advantages, but the valuation just doesn't stack up.
Look at CSL for instance, higher forecast medium term growth, massive potential upside in new treatments and is on 40 times earnings. Same defensive 'healthcare' earnings, similar dominate market position with big R&D and scale competitive advantages. Sound familiar? Why does COH deserve such a premium rolling along at 10% PA growth? This momentum trade will surely roll over to more historic valuation multiples in due course. For some perspective, 30 times, top end of guidance, forward EPS of $4.78 is $143.37 per share.
COH Price at posting:
$192.75 Sentiment: Sell Disclosure: Not Held
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