What Percentage Of Coach’s Stock Price Can Be Attributed To Growth?

In this analysis, we quantify the percentage of Coach’s (NYSE:COH)  stock that can be attributed to growth.

We know that a stock’s valuation can be highly influenced by expectations of future earnings growth. However, in theory, if a company sees no growth opportunities it should distribute all its earnings as dividends to its shareholders. The only capital expenditure required in such a case will be equal to the amount required to replace or maintain existing assets.

Mathematically, (capital expenditure + change in net working capital + change in net operating assets) = (depreciation and amortization).

We assume that this amount of capital expenditure will be sufficient for the company to retain its market share and keep margins constant. In this case, if the company pays all earnings as dividends for the rest of the period, we can calculate the Present Value of Growth Opportunity (PVGO) of a stock from the formula given below:

PVGO = Current Stock Price – (Forecasted Earnings For The Next Period ÷ Cost Of Equity)

Have more questions on Coach? See the links below:

• Why Are We Bullish On Coach?
• What Has Resulted In A Decline In North American Net Sales And A Rise in International Sales For Coach So Far In FY 2016?
• Coach’s Strong Presence In China To Help The Company In The Future
• How Did the Different Segments Of Coach Perform In Q3 2016?
• How Has The Transformation Plan Affected Coach’s North American Retail Store Count?
• Coach Q3 2016 Earnings And Revenue Beats Expectations
• What To Expect From Coach In Q3 FY 2016?
• Is Coach’s Transformation Plan Working?
• What Is The Breakdown Of The Charges Associated With Coach’s Transformation Plan?
• What is Coach’s Revenue And EBITDA Breakdown?
• Coach: Year 2015 In Review
• How Has Coach’s Revenue And EBITDA Composition Changed In The Last 3 Years?
• Is The Men’s Segment Becoming Big Business For Coach?
• By What Percentage Did Coach’s Revenue & EBITDA Decline In The Last 3 Years?
• How Will Coach’s Revenue And EBITDA Change In The Next 3 Years?
• What Is Coach’s Fundamental Value Based On Expected 2016 Results?

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