Expanding MyDay And MiSight Product Lines Will Meet Strong Market Demand

Key Takeaways

• Expansion of MyDay and international launches are key strategies for meeting market demand, enhancing efficiency, and driving revenue growth.
  
• Strategic sales realignment and innovation in myopia and fertility segments aim to boost operational efficiency, expand market share, and improve net margins.
  
• Challenges in China, channel inventory issues, and competitive pressures may impact Cooper Companies' revenue growth, earnings, and market position.

Catalysts

Develops, manufactures, and markets contact lens wearers.

• The expansion of MyDay product availability and accelerated product launches, including international launches, are expected to drive revenue growth as they meet strong market demand.
  
• The ongoing investments in capacity expansion for MyDay lenses will likely boost production efficiency, thereby improving gross margins and potentially driving higher earnings.
  
• Cooper Companies plans strategic realignment of its sales force and increased digital marketing efforts within the myopia management portfolio, poised to capture revenue growth, especially with MiSight targeting a 40% growth rate.
  
• The integration of innovative testing methodologies in the fertility business and the launch of new products and services are anticipated to enhance revenue and operational efficiencies, potentially contributing positively to net margins.
  
• Strong operational execution in product categories such as torics, multifocals, and private label products suggest continued market share gains, which could lead to sustained revenue growth and improved earnings.

Cooper Companies Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Cooper Companies's revenue will grow by 6.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 10.6% today to 16.3% in 3 years time.
• Analysts expect earnings to reach $774.2 million (and earnings per share of $3.89) by about March 2028, up from $415.4 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $879.6 million in earnings, and the most bearish expecting $639 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 34.4x on those 2028 earnings, down from 38.5x today. This future PE is greater than the current PE for the US Medical Equipment industry at 28.7x.
• Analysts expect the number of shares outstanding to grow by 0.43% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.09%, as per the Simply Wall St company report.

Cooper Companies Future Earnings Per Share Growth

Risks

• Revenue in China has declined year-over-year, indicating ongoing challenges in this key market, which could affect overall revenue growth given the market's significance.
  
• There have been channel inventory reductions and competition-driven pressure in initial quarters, potentially impacting revenue stability and demand forecasts.
  
• CooperSurgical experienced only a 1% revenue growth in fertility due to unique items affecting the quarter, presenting risk to meeting high growth expectations and impacting overall earnings.
  
• The introduction of competing non-hormonal IUDs could influence PARAGARD's market performance, affecting revenue projections and competitive positioning.
  
• The company faces risks tied to foreign exchange fluctuations that can impact bottom-line performance and affect earnings guidance reliability.

Valuation

• The analysts have a consensus price target of $107.411 for Cooper Companies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $120.0, and the most bearish reporting a price target of just $90.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.8 billion, earnings will come to $774.2 million, and it would be trading on a PE ratio of 34.4x, assuming you use a discount rate of 7.1%.
• Given the current share price of $80.04, the analyst price target of $107.41 is 25.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.