October 12, 2012
Written By Richard Segarra, CFA
“Cooper Tire & Rubber Co. (CTB) is a manufacturer and marketer of replacement tires. We project that Cooper will strongly outperform the market over the next six to 12 months. This projection is based on our analysis of three key factors that influence common stock performance: earnings strength, relative valuation, and recent price movement. Earnings Strength is very positive.
“Ford’s earnings momentum measures the acceleration or deceleration in trailing 12 month operating earnings per share growth. [Cooper’s] EPS increased from $1.44 to an estimated $2.72 over the past five quarters indicating an improving growth rate. Analyst forecasts have recently been raised. The company recently reported better than expected results. … Relative Valuation is very positive. Cooper’s operating earnings yield of 14.2% ranks above 96% of the other companies in the Ford universe of stocks, indicating that it is undervalued. [Lastly,] Price Movement is very positive. Cooper’s stock price is up 76.1% in the last 12 months (very positive), up 9.4% in the past quarter (negative) and down 4.1% in the past month (very positive). This historical performance should lead to above average price performance in the next one to three months.”
Richard Segarra, CFA, Ford Equity Research Report, September 28, 2012