Cooper Companies (COO)
Salud / Dispositivos médicos
Cooper Companies is a global medical device manufacturer in two businesses — contact lenses (CooperVision) and fertility/women's health (CooperSurgical) — with solid niche positions, but trades at a multiple that only holds if credit is given to the company's non-GAAP earnings (which excludes the recurring amortization of acquired intangibles); on earnings normalized more strictly, the current price implies a multiple expansion that the quality of the business — ROIC below the 10% bar, burdened by the goodwill from a history of CooperSurgical acquisitions — does not support with a margin of safety.
- Price
- $73.78
- Intrinsic value (5y, base)
- $64
- Total annual return (5y)
- -2.7%
- Status (nominal)
- Overvalued
- Margin of safety
- No margin
The essentials
- CooperVision (67% of revenue, operating margin 27% and expanding) has a unique niche position with MiSight, the only lens approved in the U.S., China, and Japan to slow the progression of childhood myopia.
- CooperSurgical (33% of revenue) built its portfolio of over 600 products through acquisitions since 1990; its operating margin fell from 9% to 3% in FY2025 due to inventory charges and severance costs, and second quarter fiscal 2026 added $271.6M net charge from the embryo culture media litigation from December 2023 (settled on over 95% of claims).
- At market price, normalized earnings (ex-litigation, without adding back the amortization of acquired intangibles) imply a P/E close to 35x, well above the band for quality medical devices (16-22x); the base case finds no margin of safety.
Intrinsic value — two valuation methods
By both methods, the value today (DCF $60 · Multiples $52) is below the market price ($74).
Pillars of the analysis
The verdict — today vs 5 years
Today — expensive, no margin of safety: at $74 trades ~43.0% above its value discounted to today (~$52); the expected return does not even reach the risk-free rate (4.5%).
At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.
The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$32.
Thesis
The business
Cooper combines a growing business with clear regulatory moat (CooperVision) with a business built through acquisitions that is undergoing restructuring and litigation (CooperSurgical). The consolidated sum does not merit a separate sum-of-the-parts valuation because both are operating medical device businesses with the same nature of capital.
The valuation
The method values Cooper on P/E against normalized owner earnings (ex-litigation charge), without adding back the amortization of acquired intangibles — a real economic cost given the history of CooperSurgical acquisitions. With an exit multiple of 35× within the medical device band (16-22x), the case base 5-year value is $64, resulting in a Overvalued verdict with -3% return.
The margin of safety
No margin of safety: the price already discounts a demanding scenario. The current market price implies a multiple close to 35x against the method's normalized earnings (ex-litigation alone), well above the 16-22x band for quality medical devices — a gap that only closes if you accept the company's non-GAAP earnings, which exclude some ~$190M/year of amortization of acquired intangibles.
What to watch
The central disconfirmation test is whether the market is right to value on non-GAAP earnings: if the amortization of CooperSurgical intangibles proves genuinely non-economic (no M&A replacement needed) and that segment's operating margin recovers toward the 9% pre-FY2025 level, the method's normalized earnings converge toward the company's and the margin of safety improves. Also watch the final litigation resolution (over 95% of claims already covered by settlement) and whether the buyback sustains at the recent rate.
Educational / informational. Does not constitute investment advice.