The Cooper Companies, Inc (COO)

Conclusion

The Cooper Companies develops and manufactures contact lenses through its CooperVision segment, and sells fertility, women's health and cryostorage products through CooperSurgical. At a price of 63.93 USD on 2026-11-09, its market capitalisation is 12.2 billion USD and its enterprise value is 14.5 billion USD.

The verdict is undervalued. The P/E of 21.3x sits against a ten-year median of 41.6x, EV/EBITDA of 16.0x against 20.6x, and price to free cash flow of 17.9x against 37.7x. The discounted cash flow gives 71.11 USD per share at a discount rate of 8.98%. The fair value band runs from 78.41 to 117.61 USD with a midpoint of 98.01 USD, and a margin of safety of 53.3% at the current price. The reverse DCF implies growth of 5.6% a year, against revenue growth of 11.0% over five years and free cash flow per share growth of 19.5%.

What holds the case up is the Altman Z-score of 3.09, the trailing free cash flow conversion of 118.9%, and eight earnings beats in eight quarters. What could break it is the return on invested capital of 3.25% against a WACC of 7.99%, the five-year free cash flow conversion of 43.5%, and estimate revisions that have only moved down, with 16 downward and no upward revisions in the last 30 days.

Financial health

Financial strength is green, supported by an Altman Z-score of 3.09 and a current ratio of 1.22, while net debt to EBITDA of 2.6x and interest coverage of 5.6x are neutral. The quick ratio is 0.51 and debt to equity is 0.31. The Altman model was designed for manufacturers; this company makes lenses and medical devices, so the zone is a reasonable guide, and it sits in the safe zone. Insolvency risk: low, about 0.16% by the estimate of the Ohlson model over one to two years. The balance sheet is solid, but net debt is more than two and a half times EBITDA, which leaves less room if earnings fall.

Earnings quality

Earnings quality is yellow, held back by five-year free cash flow conversion of 43.5%, against support from a Piotroski score of 6 out of 9, negative accruals of -0.034 and a five-year share count change of 0.18% a year, which is a slight increase rather than buybacks. Stock-based compensation is 1.7% of revenue, and free cash flow after it is 607.5 million USD. The Beneish M-score value is not available. The company beat earnings expectations in all eight quarters, by 4.5% on average. Estimate revisions are negative: the current year moved -2.1% over 90 days and the next year -6.1%, with 16 downward revisions in the last 30 days for each year.

Profitability

Profitability is yellow. Gross margin is 63.6% against a ten-year median of 64.6%, operating margin is 12.9% against 16.6%, and net margin is 13.5% against 10.9%. Return on invested capital is 3.25% against a WACC of 7.99%, a ROIC minus WACC of -4.7%, which means the company does not earn its cost of capital. The five-year median ROIC is 3.8%. Return on equity is 6.9%. The DuPont split shows a net margin of 9.2%, an asset turnover of 0.33 and an equity multiplier of 1.50, so leverage does not inflate the return much. Returns are low, and the operating margin has fallen well below its history.

Growth

Growth is green. Revenue compound growth is 7.4% over three years, 11.0% over five and 8.6% over ten, and revenue grew in 9 of 10 comparable years. Earnings per share fell 1.2% a year over three years but grew 9.3% over five and 6.1% over ten. Free cash flow per share fell 1.5% a year over three years, but grew 19.5% over five and 11.2% over ten. The next-year earnings growth estimate is 3.6%, well below the longer-term record. The recent trend is weaker than the long-run record.

Valuation

Valuation is green. Today's multiples sit below their ten-year medians: P/E 21.3x against 41.6x, a premium of -48.8%; EV/EBITDA 16.0x against 20.6x, -22.5%; price to free cash flow 17.9x against 37.7x, -52.5%; price to sales 2.9x against 4.9x, -41.0%; price to book 1.5x against 3.0x, -51.5%. The discounted cash flow gives 71.11 USD per share at a discount rate of 8.98%, and the terminal value makes up 57.6% of it. The fair value from historical multiples is 124.90 USD. The fair value band is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, and is not a price target. The reverse DCF implies 5.6% growth against 11.0% delivered in revenue over five years. The company pays no dividend, so the dividend yield is 0%.

Risks

Low returns are the main weakness. A ROIC of 3.25% below a WACC of 7.99% means each new investment adds little value, so growth from reinvestment is unlikely to close the gap quickly. Weak five-year free cash flow conversion of 43.5% means reported profit has not always turned into cash. Estimate revisions that only move down could mean the earnings base falls further. Net debt of 2.6x EBITDA and interest coverage of 5.6x would both come under pressure if EBITDA declines. Because the terminal value makes up 57.6% of the discounted cash flow value, small changes in long-term assumptions move the result. Several items are not available: the Beneish M-score value, a debt maturity schedule and revenue by segment. This analysis rests only on the figures provided and cannot judge those missing items.