Friday, September 20, 2013

Analysis of Mizuno



A Japanese sports goods manufacturer


Company: Mizuno

Business: A Japanese sports goods company with similar product lines as the others and they themselves divide it into: Baseball goods, Sporting footwear, Sporting Apparel, Golf goods and Others. Mizuno started to produce their first golf clubs already in the 30s'. Just like Asics they have had a tough time due to the deflation in Japan.

Active: They are present all over the world with sales offices however 75% of their revenue has been coming from Japan so they have established themselves worse then Asics outside Japan.

P/E: 42.5

contrarian values of P/E, P/B, ROE as well as dividend
The P/E for Mizuno is awful with 45.5 but the P/B is ok with 1. Still with Grahams formula we end up in a situation with a very clear no go! The earnings to sales are very low with only 1% and the ROE has plenty left to wish for with only 2.3%. The book to debt is pretty ok with a ratio of 1.2. The growth in the last five years has been 0.2% which is nothing to brag about which then gives us a motivated P/E of 8 to 10. This means that Mizuno is today overvalued on the market with its current P/E of over 45. They pay a dividend of an amazing 0.8% which represents an astonishing 35% of their revenue so there is little room to increase it but I would then probably prefer that they take advantage of a potential Japanese inflation and start pushing commercials and sales outside of Japan.

Conclusion: All the signals indicate that one should not invest in Mizuno today. The market obviously have high hopes for them which is why the P/E is so high because it has nothing to do with the growth they have had in the past. I will still find it interesting to see if they will manage to get sales running outside of Japan. They already have the organization around the world it is just that the numbers are not matching up.

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