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Luxury handbag maker Coach (NYSE:COH) has long been a favorite of growth investors. Even in tough economic times, the luxury company expanded sales with strong overseas growth and entries into new markets. Here are six reasons why shares of Coach look like a buy at the moment.

Shoes

Despite being a leader in the handbag market, Coach hasn't decided to stop there. Coach is taking on rivals Michael Kors (NYSE:KORS) and Tory Burch in the competitive shoes market. In March, the company began a new line of shoes at 170 North American locations. In the second half of the year, that line will expand to more stores. The new shoes are produced by Jimlar Corporation.

Based on current sales and trends, the footwear category is expected to hit $250 million for the fiscal year ending June 30. Coach is also considering moving the footwear category to its factory outlets as well. Analysts are mixed about the move into shoes. Bearish cases argue that Coach's amazing margins may be hurt. Bullish analysts remind investors that the shoe market is a $23.5 billion industry and Coach can score big with even a small market share.

The entry into shoes is a good thing, considering handbag sales may be capping. In December, Coach lost market share of the North American handbag segment for the first time. In fiscal 2012, only 7% of sales came from categories outside of handbags and accessories. The growth of the shoe market should boost sales going forward and can offset any weakness in handbags or specific geographic regions.

Price-to-Earnings Ratio

Analysts on Yahoo Finance see Coach posting earnings per share of $3.73 in fiscal 2013. The following year, analysts see earnings per share climbing to $4.12. This currently gives Coach a price-to-earnings ratio of 15.6 and 14.1 on a current and forward basis. I think, with its strong near double-digit sales growth and increase into other business segments, shares should be trading closer to a valuation of 17 or 18 times earnings per share. This would give shares a price target of $74.16 for fiscal 2014, representing a share increase of 27% going forward.

China/Hong Kong Growth

In the third quarter, Coach saw international sales increase 6% to $382 million. Adjusted for currency, sales would have increased 14%. The most significant contributor to this growth was China. Sales in China were up 40% in the third quarter and Coach stores saw double-digit same-store sales growth in the region for the third quarter.

Coach also opened its 100th store in China during the third quarter. The region continues to be a huge growing opportunity for the company. The company remains on pace to generate $425 million in annual sales from China. This amount will continue to increase at double-digit rates going forward. China and Hong Kong remain well positioned to capture tourism dollars and continue to see strong sales of luxury goods.

Men's Market

Coach's men's segment continues to heat up. In the third quarter, Coach reported a 7% increase in total sales. In that quarter, the company reported that it had gained traction in the men's and digital segments. With strong third-quarter sales, the company is now on track to do annual sales of $600 million in its men's segment. This represents growth of 50% from the prior year and puts the company is a good position to gain market share going forward as the brand catches on and gets re-orders.

Dividend Yield

In May, Coach announced a 12.5% increase in its quarterly dividend payout. The current quarterly dividend of $0.338, represents a yield of 2.3%. Since beginning a dividend payout in 2009, the company has raised the payout amount every year. With earnings per share estimated at $3.73 for fiscal 2013, Coach is paying out less than 40% of earnings to shareholders.

Conclusion

Coach is growing fast in international markets. This growth along with new segments like shoes offer great opportunities for both value and growth investors. Coach has everything to love right now: low valuation, increasing dividend yield, growing international sales, and new products. Shares of Coach have traded between $45.87 and $63.24 over the last 52 weeks. Shares currently trade above $58 at the time of writing. As I mentioned above, there is room for Coach shares to grow on a valuation model. Look for shares to hit new 52-week highs very soon.

Source: 5 Reasons To Buy Shares Of Coach