MyDay Energys And MiSight Innovations Will Drive Significant Revenue Growth

Key Takeaways

• Expanding capacity and innovating products, such as MyDay lenses, are expected to drive significant revenue growth for Cooper Companies.
  
• Investments in technology and myopia solutions are likely to sustain leadership and enhance long-term market position.
  
• Revenue volatility is a concern due to market softness, competition, reliance on capacity expansion, and significant capital expenditures impacting cash flow.

Catalysts

Develops, manufactures, and markets contact lens wearers.

• Cooper Companies plans to increase the availability of its innovative products and expand its manufacturing capacity, which should enhance revenue growth.
  
• There is strong demand for MyDay silicone hydrogel lenses, particularly the MyDay Energys, which is expected to drive future revenue expansion as production capacity increases to meet demand.
  
• Investment in technology and new product development, especially within multifocals and torics, is likely to maintain the company's market-leading position, positively affecting long-term revenue.
  
• The focus on myopia management with MiSight, which is expected to grow around 40% in fiscal 2025, supported by successful marketing campaigns and partnerships, should significantly boost revenue.
  
• Within the CooperSurgical division, growth in fertility due to innovative products and services, such as genetic testing, aligned with increasing awareness and access, is expected to bolster revenue growth.

Cooper Companies Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Cooper Companies's revenue will grow by 6.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 10.1% today to 16.4% in 3 years time.
• Analysts expect earnings to reach $769.0 million (and earnings per share of $3.82) by about December 2027, up from $392.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 35.6x on those 2027 earnings, down from 50.4x today. This future PE is lower than the current PE for the US Medical Equipment industry at 37.4x.
• Analysts expect the number of shares outstanding to grow by 0.24% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.73%, as per the Simply Wall St company report.

Cooper Companies Future Earnings Per Share Growth

Risks

• Unexpected softness at the end of the quarter in key markets like the U.S. and China could indicate potential revenue volatility or weakening demand, potentially impacting future revenue stability.
  
• Paragard faced a 10% decline due to competitive pressure from other birth control options, which may pose a risk to sales growth and affect revenue projections for CooperSurgical.
  
• Heavy reliance on capacity expansion for MyDay lenses suggests that failure to increase production capacity quickly enough could limit revenue growth opportunities and market share gains in the fast-growing dailies segment.
  
• The myopia management business experienced inventory contraction in the U.S., which could signal distribution challenges or misalignment in demand forecasting, potentially affecting revenue targets.
  
• Cooper's high investment in manufacturing capacity and technology implies significant capital expenditures; any delays or inefficiencies in these expansions could strain cash flow and net margins.

Valuation

• The analysts have a consensus price target of $112.01 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 $125.0, 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 2027, revenues will be $4.7 billion, earnings will come to $769.0 million, and it would be trading on a PE ratio of 35.6x, assuming you use a discount rate of 6.7%.
  
• Given the current share price of $99.08, the analyst's price target of $112.01 is 11.5% 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.