Review of Kenneth Cole Productions (KCP)

Kenneth Cole Productions, Inc. designs, arranges manufacture, and markets consumer goods, including footwear and handbags, under the brand names Kenneth Cole New York, Kenneth Cole Reaction, Tribeca, and Bongo. I found KCP by screening for companies with a high return on invested capital which also offer generous dividend yields. The company’s stock has performed quite well relative to the S&P, and the current dividend yield is 3.00%; however, the stock is volatile with a beta of 1.23.

Kenneth Cole Productions is relatively small with a market cap of 479M. The P/E ratio is a tad high at 18.6, but the stock looks cheap in terms of the price to book value ratio of 1.91. With a current ratio of 6.6, the company appears financially sound. KCP is also selling at about a 25% discount to its apparent intrinsic value, but the stock does not appear suitable for conservative investors. Net income has fluctuated widely with cyclical changes in demand for their products. KCP has done a very nice job of raising the dividend while earnings have been rising, but the payout ratio has gotten rather high, 56%, and they might need to reduce the dividend if earnings were to falter. There have been many stock sales by company insiders but no recent purchases. I question how well this stock would hold up in a general market downturn.


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