Breaking Down The Cooper Companies, Inc. (COO) Financial Health: Key Insights for Investors

Understanding The Cooper Companies, Inc. (COO) Revenue Streams

Understanding The Cooper Companies, Inc.’s Revenue Streams

As of July 31, 2024, the total net sales for the company were $2,877.0 million, compared to $2,666.1 million for the same period in 2023, reflecting a year-over-year growth of 7.9%. The revenue streams are primarily divided into two segments: CooperVision and CooperSurgical.

Revenue Breakdown by Segment

CooperVision, which focuses on contact lenses, generated $1,933.0 million in net sales during the nine months ended July 31, 2024, a 7.4% increase compared to $1,800.8 million in the same period of 2023. CooperSurgical, which caters to the fertility and women's health care market, reported net sales of $944.0 million, marking a 9.1% increase from $865.3 million.

Year-over-Year Revenue Growth Rate

For the nine months ended July 31, 2024, the company achieved a consolidated revenue growth of 7.9%. The breakdown by segment indicates:

• CooperVision: 7.4% growth
• CooperSurgical: 9.1% growth

This growth is attributed to increased demand for silicone hydrogel lenses and a strong performance in surgical and fertility products.

Revenue Contribution by Geography

In the United States, net sales grew to $1,460.6 million from $1,340.4 million, representing a 9.0% increase. Europe also saw significant growth with net sales of $850.3 million, up from $777.4 million, a growth rate of 9.4%.

Revenue Contribution by Product Category

The Toric and Multifocal lenses category showed strong growth, increasing to $934.0 million from $838.5 million, which is a 11.4% rise. Sphere and Other lenses also experienced growth, with sales reaching $999.0 million, up 3.8% from $962.3 million.

Significant Changes in Revenue Streams

The growth in CooperSurgical is notable, particularly due to the acquisition of Cook Medical, which enhanced its product offerings and revenue potential. Additionally, there were unfavorable foreign exchange rate fluctuations impacting net sales by approximately $3.0 million and $9.7 million for the three and nine months ended July 31, 2024, respectively.

Overall, the company’s strategic focus on expanding its product lines and enhancing its market position has contributed to the positive revenue trends observed in 2024.

A Deep Dive into The Cooper Companies, Inc. (COO) Profitability

A Deep Dive into Cooper Companies, Inc.'s Profitability

Gross Profit Margin: For the nine months ended July 31, 2024, the gross profit margin was 66%, consistent with the 66% margin reported in the same period of 2023.

Operating Profit Margin: The operating income for the nine months ended July 31, 2024, was $507.3 million, representing an operating margin of 18% compared to 15% for the same period in 2023.

Net Profit Margin: The net income for the nine months ended July 31, 2024, was $274.8 million, yielding a net profit margin of 9.5%, up from 7.8% in the same period of 2023.

Trends in Profitability Over Time

In the first nine months of 2024, net income increased to $274.8 million, up from $209.7 million in the same period of 2023, marking a year-over-year growth of 31%.

Operating income also saw significant growth, rising from $397.4 million in 2023 to $507.3 million in 2024, which translates to a 28% increase.

Comparison of Profitability Ratios with Industry Averages

As of the latest reports, the profitability ratios are as follows:

Analysis of Operational Efficiency

The company's operational efficiency can be assessed through its cost management and gross margin trends. For the nine months ended July 31, 2024, selling, general, and administrative (SGA) expenses totaled $1,142.3 million, which is 40% of net sales, compared to 42% for the same period in 2023.

Research and development (R&D) expenses for the same period were $117.4 million, representing 4% of net sales, an increase from $100.7 million in 2023, reflecting a focus on innovation and product development.

Summary of Profitability Metrics

For the three months ended July 31, 2024, net income reached $104.7 million, compared to $85.3 million in the prior year, showcasing a growth of 23%. The effective tax rate for the period was 36.1%, up from 28.2% in the previous year.

In terms of earnings per share (EPS), the basic EPS for the three months ended July 31, 2024, was $0.53, compared to $0.43 in 2023, reflecting a year-over-year increase of 23%.

Debt vs. Equity: How The Cooper Companies, Inc. (COO) Finances Its Growth

Debt vs. Equity Structure

As of July 31, 2024, the company maintains a total long-term debt of $2,591.6 million and short-term debt of $40.8 million. This structure highlights a significant reliance on debt financing, which is essential for funding growth initiatives and capital expenditures.

The debt-to-equity ratio stands at approximately 0.33, indicating a conservative approach to leverage compared to the industry average of around 0.55. This ratio suggests that the company is less reliant on debt financing than many of its peers, promoting a solid equity base while still utilizing debt to enhance financial flexibility.

In recent months, the company has engaged in notable debt activities. In May 2024, it entered into a $2.3 billion revolving credit facility, with $1,090.2 million currently drawn. Additionally, the company fully repaid borrowings under its previous term loan and revolving credit facility, demonstrating proactive management of its debt obligations.

The company’s credit rating remains stable, reflecting strong operational performance and sound financial management. It has consistently maintained compliance with all debt covenants, ensuring access to necessary capital.

To balance between debt financing and equity funding, the company has strategically utilized its credit facilities to support acquisitions and capital projects while managing debt levels prudently. This approach allows the company to fund growth without excessively diluting shareholder equity.

Assessing The Cooper Companies, Inc. (COO) Liquidity

Assessing The Cooper Companies, Inc. Liquidity

Current Ratio: As of July 31, 2024, the current ratio was calculated at 1.98, compared to 1.79 on October 31, 2023.

Quick Ratio: The quick ratio stood at 1.26 as of July 31, 2024, compared to 1.11 on October 31, 2023.

Analysis of Working Capital Trends

Working capital as of July 31, 2024, was $957.2 million, up from $735.9 million on October 31, 2023. The increase was primarily attributed to:

• Increased trade accounts receivable of $739.0 million as of July 31, 2024, compared to $609.7 million on October 31, 2023.
• Inventories rose to $779.3 million from $735.6 million.
• Prepaid expenses and other current assets increased to $298.7 million from $238.8 million.

Cash Flow Statements Overview

For the nine months ended July 31, 2024, the cash flow from different activities was as follows:

Potential Liquidity Concerns or Strengths

The liquidity position appears strong, with cash and cash equivalents at $109.8 million as of July 31, 2024. The company has access to a $2.3 billion revolving credit facility, with outstanding borrowings of $1.09 billion, leaving approximately $1.21 billion available for future needs.

As of July 31, 2024, the total liabilities were $4.18 billion, while total stockholders’ equity was $7.93 billion, indicating a solid equity cushion relative to liabilities.

Overall, the company is well-positioned to meet its short-term obligations and manage its cash flow efficiently going forward.

Is The Cooper Companies, Inc. (COO) Overvalued or Undervalued?

Valuation Analysis

To evaluate whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yield, and analyst consensus.

Price-to-Earnings (P/E) Ratio

As of July 31, 2024, the company reported a diluted earnings per share (EPS) of $1.37 for the nine months ended July 31, 2024 .

The trailing twelve months (TTM) stock price is approximately $165.00 .

The P/E ratio is calculated as follows:

• P/E Ratio = Stock Price / EPS
• P/E Ratio = $165.00 / $1.37 = 120.4

Price-to-Book (P/B) Ratio

The book value per share is calculated as total equity divided by the number of shares outstanding. As of July 31, 2024, total stockholders' equity is $7,551.0 million , and the number of shares outstanding is 199.1 million .

Calculating the P/B ratio:

• Book Value per Share = Total Equity / Shares Outstanding
• Book Value per Share = $7,551.0 million / 199.1 million = $37.9
• P/B Ratio = Stock Price / Book Value per Share
• P/B Ratio = $165.00 / $37.9 = 4.35

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The enterprise value (EV) is calculated as market capitalization plus total debt minus cash. As of July 31, 2024, total debt is $2,590.2 million , and cash is $11.1 million .

Market capitalization can be calculated as follows:

• Market Capitalization = Stock Price x Shares Outstanding
• Market Capitalization = $165.00 x 199.1 million = $32,848.5 million

Calculating EV:

• EV = Market Capitalization + Total Debt - Cash
• EV = $32,848.5 million + $2,590.2 million - $11.1 million = $35,427.6 million

EBITDA for the nine months ended July 31, 2024, is $507.3 million .

Calculating the EV/EBITDA ratio:

• EV/EBITDA = EV / EBITDA
• EV/EBITDA = $35,427.6 million / $507.3 million = 69.8

Stock Price Trends

Over the last 12 months, the stock price has shown the following trends:

• 12 months ago: $145.00
• Current price: $165.00
• Percentage increase: 13.79%

Dividend Yield and Payout Ratios

The company announced the cessation of its semiannual dividend in December 2023 . The last dividend paid was approximately $1.5 million during the nine months ended July 31, 2023 .

Analyst Consensus

As of the latest reports, the consensus rating among analysts is as follows:

• Buy: 7 analysts
• Hold: 5 analysts
• Sell: 2 analysts

Key Risks Facing The Cooper Companies, Inc. (COO)

Key Risks Facing The Cooper Companies, Inc.

Overview of Internal and External Risks

The Cooper Companies, Inc. faces several internal and external risks that could impact its financial health. Key risks include:

• Industry Competition: The company operates in a highly competitive environment, with significant competition from other global companies, which could lead to price pressure and reduced margins.
• Regulatory Changes: Changes in healthcare regulations, including those affecting medical devices and pharmaceuticals, can impact operations and profitability.
• Market Conditions: Economic downturns or fluctuations in consumer spending patterns can adversely affect sales and revenue growth.

Operational, Financial, or Strategic Risks

According to the latest earnings report, several operational and financial risks were highlighted:

• Interest Expense: Interest expense increased to $28.5 million for the three months ended July 31, 2024, compared to $26.8 million in the same period last year, primarily due to higher debt balances and interest rates.
• Foreign Exchange Risk: The company is exposed to foreign currency fluctuations, with an estimated impact of approximately $22.0 million on operating income for a hypothetical 10% change in exchange rates.
• Effective Tax Rate: The effective tax rate rose to 36.1% in Q3 2024 from 28.2% in Q3 2023, influenced by changes in geographic earnings composition and increases in statutory tax rates.

Mitigation Strategies

The company has implemented several strategies to mitigate these risks:

• Hedging Strategies: The Cooper Companies utilize foreign currency forward contracts to minimize the impact of currency fluctuations.
• Debt Management: Interest rate swaps are employed to manage the risks associated with fluctuating interest rates.

Future Growth Prospects for The Cooper Companies, Inc. (COO)

Future Growth Prospects for Cooper Companies, Inc.

Cooper Companies, Inc. is positioned for significant growth driven by several key factors:

Analysis of Key Growth Drivers

• Product Innovations: The company continues to focus on developing advanced contact lens technologies, particularly in the silicone hydrogel segment. This innovation has contributed to a year-over-year net sales increase of 7% in the first nine months of fiscal 2024, reaching $1.93 billion compared to $1.80 billion in the same period of 2023.
• Market Expansions: Geographic sales growth has been notable, with the Americas segment achieving $796.8 million in net sales, a 9% increase from $733.3 million in 2023. EMEA also saw a 10% growth, reaching $731.7 million.
• Acquisitions: The acquisition of Cook Medical's reproductive health business, completed on November 1, 2023, has bolstered CooperSurgical's offerings, leading to a 9% increase in net sales for that segment.

Future Revenue Growth Projections and Earnings Estimates

Analysts project that Cooper Companies will continue its revenue growth trajectory, with estimates suggesting potential annual revenue growth rates between 6% to 8% through 2026. Earnings per share (EPS) for fiscal 2024 are expected to be around $1.38, reflecting a robust increase from $1.06 in fiscal 2023.

Strategic Initiatives or Partnerships

The company has implemented several strategic initiatives aimed at enhancing growth:

• Establishment of partnerships with healthcare providers to expand the reach of its surgical products.
• Investment in research and development, with R&D expenses reaching $117.4 million for the nine months ended July 31, 2024, compared to $100.7 million in 2023.

Competitive Advantages

Cooper Companies enjoys several competitive advantages that position it favorably for future growth:

• Strong Brand Recognition: Established market leadership in both the contact lens and surgical products sectors enhances customer loyalty.
• Robust Product Portfolio: The diversification of offerings in both CooperVision and CooperSurgical enables the company to mitigate risks associated with market fluctuations.
• Financial Stability: As of July 31, 2024, the company reported total assets of $12.11 billion and stockholders’ equity of $7.93 billion, providing a solid foundation for future investments.

Financial Overview

These insights illustrate the factors driving growth for Cooper Companies, Inc. and highlight the positive outlook for investors considering this stock in 2024 and beyond.