Why Cooper Looks Like a Good Bet

Whether you're looking at the company's geographical or segmental performance, Cooper Companies (NYS: COO) has posted decent growth figures everywhere in the second quarter. Yet the market has punished the company, sending its shares down because it did not meet Street expectations.

However, this doesn't mean that you should throw away this stock. On the contrary, after this fall, Cooper looks even more attractive. Here's why.

The quarter
Cooper's top line grew to $344.6 million, a modest 6% increase compared to last year. The company earns over 80% of its revenue from its eye-care division CooperVision, which recorded a 5% improvement in sales compared to last year, while sales at its surgical equipment division CooperSurgical climbed 13%, mainly helped by acquisitions.

The company's bottom line increased as net income grew by a staggering 55% to $55 million or $1.12 per share, which missed analysts' estimates of $1.20 per share. Unfavorable foreign-currency exchange rates were partly responsible for dilution of profits. Otherwise, Cooper has had a good record of beating revenue and profit estimates, as evidenced from its previous four quarters.

Future vision
Looking beyond the earnings figures, the company appears strong for several other reasons as well. To start with, Cooper is improving operational efficiency by improving its margins. Second, the company is acquiring a greater share of the contact lens market, according to a few analysts. Third, Cooper is on the lookout to buy Danish fertility-treatment and equipment company Origio. If this venture succeeds, CooperSurgical would become the global leader in the in-vitro fertilizer market. And finally, the company is lowering its debt burden gradually: Cooper decreased its debt by 22% to $319 million from the previous quarter.

The Foolish bottom line
Cooper has slightly lowered its annual earnings forecast to an average of $5 per share from $5.02 per share. Although this is below Street expectations of $5.08 per share, the company does seem to have a well-defined growth strategy that makes it look quite attractive. So if you think this stock is worth watching, add Cooper to your very own free watchlist.

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At the time thisarticle was published Fool contributor Navjot Kaur does not own shares of any of the companies mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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