Cooper’s Vision Care Business Gets a Fresh Look

After reviewing our key valuation assumptions, we are lowering our fair value estimate for the Cooper Companies COO to $320 from $359 due to our revised long-term assumptions. Cooper is one of the leading vision care companies in the world and it operates in two segments: CooperVision and CooperSurgical.

CooperVision made up 68% of total sales in 2022. We forecast a mid-single-digit long-term growth for the segment driven by an aging population, an increasing prevalence of myopia (nearsightedness) and a favorable product mix. The industry has seen an increasing portion of lens wearers upgrade their lenses based on modality (reusable to daily), lens material (nonsilicone hydrogel to silicone hydrogel), and lens type (spherical to multifocal or toric). Cooper also has the most comprehensive specialty contact lens portfolio, including orthokeratology lenses (overnight lenses to correct myopia) and scleral lenses (large gas permeable lenses for irregular cornea), in the industry. Trade-ups come at higher price tags and higher margins, and we believe Cooper is well positioned to enjoy these tailwinds.

CooperSurgical made up 32% of sales in 2022, and we forecast a high-single digit growth for the segment through our forecast period. Macro drivers behind the growing top line includes women delaying childbirth, an increasing awareness of and education on birth control, as well as an improving access to women’s health care. We expect that an increasing portion of women who have children at a later age will fuel greater demand for IUDs (intrauterine devices). And we expect Paragard, Cooper’s IUD, to enjoy this trend. We forecast Paragard to grow by low- to mid-single digit and to maintain its 17% of the domestic IUD market over the next three years. Paragard is the only nonhormonal IUD available in the U.S. and it has the longest FDA-approved duration of effectiveness (10 years) out of all IUD options on the market.