Cooper’s common shares will need to reach $165 to achieve average annual stock market performance of 9.0% over the next 6 years. Upper quartile performance will require a $195 Cooper stock price by 2029. As reflected at the current price of $99, what future Cooper operating performance is the market anticipating?
Executive Summary
- Cooper’s important characteristics: above average expected growth, low profitability, low stability, and low financial strength. Growth is a big positive influence on Cooper’s valuation while Risk Profile is a big negative influence.
- Average valuation, below market shareholder returns. Current valuation levels are average relative to the Cooper Peer Group. Recent market returns have underperformed the Cooper Peer Group. Total shareholder returns expected to seriously beat the overall equity market. Based on current investor expectations, Cooper shares should reach a level of $191 by 2029 — an 11.7% per year total shareholder return. A 2029 stock price of $165 would reflect median performance and a price of $195 would be required to reach upper quartile performance.
- Growth has been Cooper’s biggest valuation strength. Historical growth has been very high relative to the Cooper Peer Group and forecasted growth is relatively average. Asset Growth, Revenue Growth, and Equity Growth have been superior. EPS Growth has lagged. Cooper’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has fallen short of equity growth driving erosion in return on equity. Cooper’s consensus growth expectations are higher than historical growth.
- Asset Turnover, and Return on Equity are group lagging. These factors have negatively affected market perceptions of Cooper. The company has very low cash and will have to work to generate attractive investments and improve valuation.
- Cooper’s risk profile is very unfavorable. Overall variability has been very high with very high revenue variability, very high E.P.S. variability, Financial Strength is very low and earnings’ expectations are relatively high. The debt/capital ratio has been relatively steady.
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