Key insights
- Wolfe Research sees Cooper Companies as undervalued due to activist pressure and underperformance in its CooperSurgical division. They believe focusing on the core CooperVision business could unlock value. The activist involvement and potential strategic changes may positively influence the stock, but the impact on the broader US equity market is limited.
Investing.com -- Wolfe Research has identified The Cooper Companies (NYSE: COO) as a new investment idea, highlighting the medical technology device company's position in the global contact lens market amid ongoing activist involvement.
Cooper Companies, with a market capitalization of $12 billion, operates through two main segments: CooperVision, which accounts for approximately 70% of revenue through contact lens sales, and CooperSurgical, representing roughly 30% of revenue with fertility and women's health products.
The company holds the top position in the contact lens market with approximately 43 million wearers globally. Cooper operates in the $11 billion soft contact lens market, which is growing at an annual rate of 4% to 6%. The market faces significant expansion potential, with expectations that 50% of the world's population, or approximately 5 billion people, will suffer from myopia by 2050.
In December, Cooper announced a new chairman and launched a strategic review following pressure from activists JANA and Browning West. The company also entered a cooperation agreement that added a director backed by Browning West.
According to Wolfe Research, the CooperVision segment's performance is being overshadowed by the underperforming CooperSurgical division. The research firm noted that approximately $2.3 billion in acquisitions over the past five years in the fragmented OB/GYN and fertility assets portfolio have impacted profitability and free cash flow.
Cooper trades at approximately 12.6 times 2027 estimated price-to-earnings ratio, representing a discount to its five-year average of 18.4 times and to peer Alcon.
Wolfe Research values Cooper at 18 times 2027 adjusted price-to-earnings, suggesting a fair value per share of $90. The company, which has an October 31 fiscal year-end, is expected to report earnings in late May.