Coats Group Plc (COA.L), formerly Guinness Peat Group plc, is a UK-based company engaged in industrial thread and consumer textile crafts. The Company serves industries, such as apparel, footwear and accessories, technical threads and engineered yarns. COA supports consumers in the crafts activities, including knitting, crochet, embroidery, patchwork and quilting, and sewing. Product offerings include threads, zips, yarns and embroidery, while brands include Rowan, Anchor, Drima, Seta Reale, Royal Paris, Susan Bates and Dual Duty XP. The Company owns over 70 manufacturing facilities, which serve industrial and crafts customers across six continents.
On Oct 13 2016, COA issued a trading update for the period July 1 – Sept 30 2016. The group said that the challenging market conditions that had impacted Q2 Industrial sales performance had improved during Q3 as Coats entered its peak sales season. Inflationary pressures on input prices were being managed well and the Company said it continued to grow market share and deliver productivity and procurement improvements. As a result, the Board expects adjusted operating profit for full year 2016 to be ahead of its previous expectations. Additionally, improvements to non-operating items will further benefit adjusted EPS, providing current foreign exchange rates persist until the end of the year. The full year results are due toward the end of February 2017.
Despite the impressive rise in COA shares since the October statement, the VectorVest stock analysis and portfolio management system continues to flag COA shares as good value across a number of key metrics. The VST-Vector (VST), is the master indicator for ranking every stock in the VectorVest database, computed from the square root of a weighted sum of the squares of Relative Value (RV), RS, and Relative Timing (RT). Stocks with the highest VST ratings have the best combinations of Value, Safety and Timing. COA has a VST rating of 1.45, which is excellent on a scale of 0.00 to 2.00. COA registers a current Value of 78.32p per share, on VectorVest, and as such is undervalued at its current price of 57.50p per share. Even the Relative Value (RV) metric, an indicator of long-term price appreciation potential, logs an RV of 1.53 for COA, again excellent on a scale of 0.00 to 2.00.
A daily price chart over the past six months of COA.L is shown above. The price is charted in candlestick format with the VectorVest calculated valuation in green above the price. Earnings per share is shown in the window below price as the blue line study. The share is charting a series of rising bottoms which is the sign of a bullish market as defined by Charles Dow some 100 years ago. Mr. Dow would have referred to the trend as being a “strong trend”. This is because the last low which occurred on the 10th January DID NOT go back and kiss the last high charted at the end of November 2016. This type of breakaway price action invariably precedes further upside which is in sync with the fundamental view on VectorVest.
Summary: VectorVest is the only FCA regulated stock analysis and portfolio management system that analyzes, sorts, ranks, and graphs over 20,000 stocks each day. That COA scores so highly across our key metrics is testament to the nascent value and future earnings potential within the company. From a timing standpoint, and with the stock still undervalued, these factors are well worth considering now in the run up to next month’s full year results. Buy.
Dr David Paul
January 18th 2017
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