Coats Group Plc – Value Analysis (LONDON:COA) : December 21, 2017

Capitalcube gives Coats Group Plc a score of 69.

Our analysis is based on comparing Coats Group Plc with the following peers – Low & Bonar PLC, Leeds Group plc, Field Systems Designs Holdings plc and Volvere plc (LWB-GB, LDSG-GB, FSD-GB and VLE-GB).

Investment Outlook

Coats Group Plc has a fundamental score of 69 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis perspective, relative outperformance last month is up from a median performance last year.
  • It currently trades at a Price/Book ratio of (8.20).
  • COA-GB outperforms its peers with a relatively high operating performance and the market also expects faster growth relative to its peers
  • COA-GB has relatively high profit margins while operating with median asset turns.
  • Compared with its chosen peers, changes in the company’s annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.
  • Over the last five years, COA-GB‘s return on assets has improved from below median to better than the median among its peers, suggesting that the company has improved its relative operations markedly.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • While COA-GB‘s revenues have increased slower than peer median, the market currently gives the company a higher than peer median P/E ratio and may be factoring in some sort of a strategic play.
  • The company’s capital investment program suggests it is under-investing in a business that is producing peer median returns.
  • COA-GB has additional debt capacity.

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Leverage & Liquidity

COA-GB has additional debt capacity.

  • With debt at a reasonable 23.78% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 31.50%), and a well-cushioned interest coverage level of 10.59x, COA-GB has the capacity to borrow some more.
  • All 4 peers for the company have an outstanding debt balance.

COA-GB has moved to a relatively high liquidity from an Some Capacity profile at the prior year-end.

  • COA-GB‘s interest coverage is its highest over the last four years and compares to a low of 0.57x in 2012.
  • The increase in its interest coverage to 10.59x from 6.43x (in 2015) was also accompanied by an increase in its peer median during this period to 10.59x from 6.43x.
  • COA-GB‘s debt-EV is its lowest over the last four years and compares to a high of 261.21% in 2014.
  • The decrease in its debt-EV to 23.78% from 140.68% (in 2015) was also accompanied by a decrease in its peer median during this period to 31.50% from 41.81%.
  • Relative to peers, debt-EV fell 106.59 percentage points (and is now lower than its peer median). Unlike the peer median, it is also below the 25% leverage benchmark.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Low & Bonar PLC 39.22 2.66 6.26 22.68
Leeds Group plc 46.12 2.87 9.72 19.73
Field Systems Designs Holdings plc N/A 1.43 51.43 1002.07
Volvere plc 18.95 4.52 15.35 84.23
Coats Group plc 23.78 1.63 10.59 -62.15
Peer Median 31.5 2.66 10.59 22.68
Best In Class 18.95 4.52 51.43 1002.07

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Company Profile

Coats Group Plc manufactures industrial threads. It provides activities such as knitting, crochet, embroidery, patchwork and quilting, and sewing. The firm serves industrial companies, including apparel, footwear and accessories, technical threads and engineered yarns. The company was founded on June 7, 1901 and is headquartered in Uxbridge, the United Kingdom.

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