Coach, Inc. (COH): Three Reasons To Buy

The company also pays dividends to its common shareholders. In its last quarter, the company announced an increase of 13% in its dividend, which is now $1.35 per common share. This makes its current dividend yield a decent 2.3%.

The only company in the luxury segment that comes close to Coach, Inc. (NYSE:COH) in this regard is Fossil Inc (NASDAQ:FOSL). In 2010, the luxury-watch maker announced its “$750 million program,” wherein the company planned to repurchase shares worth $750 million by 2013. This represents about 25% of the company’s total capitalization.

In December 2012, the company announced a new plan under which the company can buy back shares worth up to $1 billion from its outstanding shares at any point in time. In its last quarter, Fossil Inc (NASDAQ:FOSL) repurchased shares worth $65 million. In its next quarterly earnings, to be released in early May, earnings per share are expected to  increase by 4.3% to $0.97 while revenue is expected to grow by 10.4%.

In the long run, Fossil Inc (NASDAQ:FOSL) has very bright prospects. The company has plans to expand its operations in Asia and Europe. The expansion plans, coupled with improved partnerships with luxury brands such as Michael Kors and Karl Lagerfield, will help drive Fossil’s growth in the quarters to come. A very strong balance sheet, a low debt-to-equity ratio of 6% and a relatively low P/E of 17 are a few other reasons that make this stock a good buy.

Summing it up

If the article didn’t give you enough reasons to buy Coach, here are a few more. Coach is trading at a relatively low P/E of 15.5, making it undervalued at present. Kors, for instance, Coach’s biggest rival in the handbag and accessory market, trades at an extremely high P/E of 33.5.

Secondly, despite facing headwinds in the past few quarters, Coach, Inc. (NYSE:COH) still commands over 10% of the global-luxury market and approximately 30% of the US-luxury market, both bigger shares than that of Kors. If Coach’s clothing line, which is to be launched in the fall, is a success, the company will soon be the leader of the game making it an even bigger success. For all intents and  purposes, this is the time to hold onto Coach!

The article 3 Reasons to Buy This Luxury Brand originally appeared on Fool.com and is written by Sonam Chamaria.

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