Analysis of Fast Retailing 2018

Company: Fast Retailing

ISIN JP3802300008 | WKN 891638

Business: A Japanese retail group. They stand on a couple of brand pillars: UNIQLO (their largest brand), GU (offer low price fashion), Theory (offering fashion for the contemporary woman, launched in New York), COMPTOIR DES COTONNIERS (French origin offering fashion for women), PRINCESSE tam·tam (also French origin offering "lingerie made by women for women") & finally J BRAND (Californian origin offering fashion denim).

Active: Highly brand based but with their biggest one Uniqlo they are present in Japan, China, Hong Kong, Taiwan, South Korea, Singapore, Malaysia, Thailand, Philippines, Indonesia, Australia, USA, UK, France, Germany, Russia and in Belgium. 

P/E: 37.5

The P/E is far too high for me with 37.5 and the P/B is also obnoxious with 8 which gives a very, very clear no go from Graham.

Their earnings to sales still need to improve because it is down at 6% but I am happy to see the change that has happened since last year. The ROE has also been pushed up slightly and is now at an excellent 21%. The book to debt ratio is also great with 1.8.

in the last five years they have managed to have a yearly revenue growth rate of over 10% which is great which then gives us a motivated P/E of 26 to 29 which means that they are still over valued by the market.

They pay out a tiny dividend of 0.8% which shockingly correspond to 33% of their earnings so they better start making more money soon.

Conclusion: Graham very clearly says no and so do I. The P/E is too high and the dividends are too low. I hope that 2017 was the year that changed Fast Retailing and that we will only see stronger and stronger improvements but I am afraid to make any such claims of it actually being the case. The e-shopping is a far too powerful movement at the moment. I will remain as a shareholder.