Analysis of Nissin Corp (9066:TYO)

NISSIN CORPORATION is a Japanese company that has been active in the logistics and tourism sector since 1938. It provides logistics, air freight, port transportation, road transportation, warehousing and sorting services internationally. It is also involved in the tourism business and real estate rental.

Nissin is trading at a fairly attractive price, at 14.6 times recurring earnings, 1.2 times tangible book value, 0.32 times sales and 9 times free cash flow. It is therefore primarily in relation to sales that Nissin's share price is attractive. We will see why a little later. From a dividend perspective, the yield is not huge, at 1.46%, but this is explained by a distribution ratio of only 21.3%. Nissin therefore has some slack under the accelerator either to invest in the running of its business or to continue to grow its dividend in the future. It has not hesitated to do so regularly in the past, with an average annual growth rate of 5.15% (over the last five years).

Just like the dividend, earnings, cash reserves and share value are growing over the long term, which demonstrates the strength of this company's business model. Nissin is clearly succeeding in creating value for its owners over the long term and this is reflected in the share price which has almost tripled over the last five years.

Liquidity reserves are comfortable, with a current ratio up to 1.77 and an identical current ratio. Nissin therefore has no problem meeting its current financial obligations. Gross margin is up to 16.4%, for a net margin of 2.9%. This modest figure explains the difference in valuation between sales and profits. The regular progression of the latter (17.8% average annual growth over the last five years) nevertheless demonstrates that, even with a reduced net margin, Nissin manages to produce profits on a recurring and increasing basis. Return on assets is also up to 4%, for a return on equity of 11.3%.

The long-term debt ratio is down relative to assets, at 19%, and total debt is also trending down over the long term. Nissin would theoretically be able to amortize all of its debt in less than four years using all of its available free cash flow. The number of shares outstanding has also been stable for many years, which avoids any dilution of shareholders' equity.

The Japanese company therefore has a solid situation, with a history that also demonstrates the sustainability of its business. Nissin's valuation may not be as attractive as other stocks I have presented so far, but it is still trading today at less than half of its price at the end of the 1990s.

I believe that the price should still rise to at least 25% to reflect the fair value of the company and that the dividend should do the same. So I have just taken a position on this stock.