Coherent Inc (COHR)

Conclusion

Coherent Corp makes lasers, optical transceivers and optoelectronic components for datacenter and communications customers, and lasers and laser systems for industrial users such as semiconductor equipment makers. At 225.19 USD on 9 November 2026, the market capitalisation is 44.4 billion USD.

The verdict is overvalued. The fair value band runs from 79.59 to 119.38 USD with a midpoint of 99.48 USD, giving a margin of safety of -55.8% at the current price. Against their own ten-year medians, the enterprise value to EBITDA of 27.39 compares with 13.96, the price to sales of 5.61 with 2.48, and the price to book of 3.91 with 1.66. The DCF per share is not available because free cash flow is negative, and the reverse DCF is not available. Revenue grew 18.0% a year over five years and 11.3% over three years.

What holds the case up: revenue grew in 9 of 10 comparable years, with a ten-year compound growth of 24.0%; the Altman Z-score of 4.07 sits in the safe zone; and the company beat earnings estimates in 7 of the last 8 quarters. What would break it: the return on invested capital of 7.8% sits below the cost of capital of 15.5%, free cash flow over the last twelve months is negative, and the share count has grown 11.2% a year over five years.

Financial health

Yellow: the Altman Z-score of 4.07, net debt to EBITDA of 1.51 and the current ratio of 2.29 support the company, while interest coverage of 0.03 pulls it down. The quick ratio is 0.97 and debt to equity is 0.38. The Altman model was built for manufacturers, and this company manufactures, so the result applies. The insolvency risk is low, about 0.1% by the estimate of the Ohlson model over one to two years. The company's interest coverage is weak, so its ability to pay interest from operating earnings is the main pressure point in an otherwise sound balance sheet.

Earnings quality

Red: free cash flow conversion is negative on both measures, and dilution pulls the score down more than the other earnings signals support it. Free cash flow conversion is -902.3 over the last twelve months and -50.8% over five years, and the accrual ratio is 4.4%. Stock-based compensation is 9.42 times revenue, and after it free cash flow is -943.7 billion USD. The share count has grown 11.2% a year over five years. The Piotroski score is 6 of 9. The Beneish M-score is not available. The company beat estimates in 7 of 8 quarters, with an average surprise of 9.57%, and analysts raised current-year estimates by 23.8% over 90 days.

Profitability

Yellow: margins sit above their ten-year medians, but returns on capital do not cover the cost of capital. The gross margin is 38.2% against a median of 37.7%, the operating margin 13.5% against 11.4%, and the net margin 12.2% against 7.3%. Operating margin stability is 0.47. ROIC is 7.8% against a WACC of 15.5%, a ROIC minus WACC of -7.8%, which means the company is currently destroying value. The five-year median ROIC is 4.6%. Return on equity is 8.5%. The DuPont split shows a net margin of 11.3%, an asset turnover of 0.39 and an equity multiplier of 1.68, so leverage contributes little to the return.

Growth

Green: revenue has compounded strongly over every period measured, and the next-year earnings estimate points to rapid growth. Revenue compound growth is 11.3% over three years, 18.0% over five and 24.0% over ten. Revenue grew in 9 of 10 comparable years. Earnings per share compound at 9.8% over five years and 14.8% over ten. Analysts expect next-year earnings per share to grow 50.1%, with estimates revised up by 17.8% over 90 days. The price already reflects a faster path than the five-year record, which is why the valuation is red.

Valuation

Red: the verdict is overvalued, with a margin of safety of -55.8% at a price of 225.19 USD. The enterprise value to EBITDA of 27.39 carries a premium of 96.2% over its ten-year median of 13.96. The price to sales of 5.61 carries a premium of 126.4% over 2.48, and the price to book of 3.91 a premium of 136.4% over 1.66. The fair value from historical multiples is 99.48 USD. The DCF per share is not available because free cash flow is negative, and the discount rate used is 16.1%, with a terminal growth rate of 2.5%. The reverse DCF is not available. The dividend yield is 0.1%, with no forward yield, and a payout on free cash flow is not meaningful while free cash flow is negative.

Risks

Interest coverage of 0.03 means operating earnings barely cover interest, so any fall in margins would strain debt service. Negative free cash flow means the company relies on its balance sheet or on equity issuance to fund operations, and the 11.2% annual growth in the share count dilutes existing holders. A ROIC of 7.8% below a WACC of 15.5% means new investment is not yet earning its cost of capital. The beta of 2.23 signals high price volatility. The DCF per share, the reverse DCF, the Beneish M-score and the price to free cash flow are not available. This analysis has no debt maturity schedule and no revenue split by segment, so refinancing timing and the mix between datacenter and industrial revenue cannot be assessed.