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Coats: Coats' Resilient Performance and Ambitious Growth Plans

Coats delivered a resilient financial performance in 2025, with revenue of $1.46 billion, flat on an organic constant exchange rate basis, and an EBIT margin of 19.8%, an 80 basis point increase. The company's EPS was $0.01648, missing analyst estimates of $0.03511. The group's free cash flow was a record $160 million, driven by high margins and low capital intensity. The company's valuation metrics indicate a reasonable price for its earnings, with a P/E Ratio of 23.74 and an EV/EBITDA of 8.44.

COA.L

GBp 87.2

-5.73%

A-Score: 4.2/10

Publication date: March 5, 2026

Full Report

Author: Analystock.ai

📋 Highlights
  • Major M&A Transactions Acquired OrthoLite ($770M) and divested U.S. Yarns, unlocking $20M cost synergies by 2028.
  • Free Cash Flow Record Generated $160 million in free cash flow, driven by high margins and operational efficiency.
  • EBIT Margin Expansion Group EBIT margin rose 80 bps to 19.8%, with Apparel division reaching 20.2% (60 bps improvement).
  • EcoVerde Growth Recycled thread brand scaled to $550M in sales, achieving 52% penetration in group thread production.
  • Margin Target Upgrade Raised EBIT margin guidance to 21-23% (200 bps increase) and $1B cumulative free cash flow over 5 years.

Divisional Performance

The Apparel division revenue was up 1% on a CER basis, with EBIT increasing by 4% and EBIT margin increasing by 60 basis points to 20.2%. The Footwear division revenue was 2% lower than 2025 on an organic CER basis, but outperformed the market with estimated organic market share growing to around 30%. The division successfully maintained pricing despite downward pressures and delivered a strong EBIT margin of 23.9%.

Strategic Update and Growth Initiatives

Coats made significant progress in 2025, reshaping its portfolio by divesting the U.S. Yarns business and acquiring OrthoLite for an enterprise value of $770 million. The company expects to deliver $20 million in joint cost synergies by 2028, with $5 million in 2026. The acquisition of OrthoLite has improved the group's quality, growth, and profitability potential, and is expected to contribute to the company's upgraded medium-term targets, including a revenue CAGR of above 5% through the cycle and a cumulative free cash flow target of $1 billion over the next 5 years.

Outlook and Valuation

Coats expects to deliver organic revenue growth in 2026, with easier comparatives, and further adjusted EBIT margin expansion driven by OrthoLite's contribution and modest organic margin improvement. Analysts estimate next year's revenue growth at 5.4%. The company's valuation metrics, including a P/S Ratio of 1.62 and a Free Cash Flow Yield of 8.12%, indicate a reasonable price for its growth prospects. The company's ROIC of 7.69% and ROE of 18.86% also suggest a strong return on investment.

Coats's A-Score