In the market we are in, it is getting harder and harder to find stocks that are good values for the money. Most stocks are priced a full valuation or even more. And for those investors looking for a truly great deal, finding a bargain stock is even tougher. But today I am going to share with you Cooper Companies, whose stock truly is a bargain.
Let’s look at this under the radar stock and see why it is one of the few bargains out there for investors.
Who Is Cooper Companies?
Just who is Cooper Companies (NYSE:COO)? The group operates primarily as a contact lens supplier that sells direct to consumers. They also operate a surgical devices and instruments division as well.
As of this writing, the contact lens side of the company makes up the majority of the revenues, while the surgical side makes up a small percent.
For the contact lens business, Cooper owns 23% of the market share and is quickly growing its presence. Its specialty lens segment is rapidly growing, and two of their offerings are really taking off with consumers.
- Multi-focals: These are lenses for people with both near and farsightedness
- Digital Zone Optics: These are lenses for long wear in front of a computer screen
As of this writing, 61% of the company’s contact lens sales come from overseas. This is important to note at these countries, like China, India, and Brazil have a fast growing middle class. As more people enter the middle class, they have more income to spend on things like daily wear contact lenses.
As for the surgical side of the business, Cooper Companies sells surgical instruments and devices for women’s heath and fertility. In 2017 they bought Teva’s Paragard and now offer the only hormone free intra-uterine device approved in United States.
Why Cooper Companies Is A Bargain
Now that you know about what the company does, let’s look at why this stock is a bargain. To begin, the contact lens market is expected to grow 4-6% annually over the next decade. This allows Cooper Companies to earn steady, consistent revenues from the contact lens side of the business.
As it ramps up its surgical side of the business, this revenue would be icing on the cake as they say. If they can simply increase sales by another 4-6% from this side of the business, you are looking at 10% annual growth easily.
And now is a great time to buy this stock. The company recently reported earnings that showed revenues were up 18%, but they missed badly on earnings per share. This was due to execution issues with the acquisition of Paragard.
As a result, the stock price dropped by 10% and is now trading at just 19 times earnings versus 24 times earnings for the market as a whole. I am confident that the company will be able to correct their execution issues with the purchase of Paragard and that the stock price will easily move higher in the coming months.
Final Thoughts
Given how the market as a whole has nicely gained over the years, it is tough for investors to find good deals. When you do come across a deal, you have to act fast in order to scoop it up at a bargain price.
The time to buy Cooper Companies is right now. They are firing on all cylinders with their contact lens business but investors have hurt the stock with the company’s short term issues surrounding Paragard.
But over the long term, this stock should be able to consistently offer 10% growth or more.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.