Subaru Corp (7270:TYO) Analysis

SUBARU CORPORATION is a Japanese automobile manufacturer active since 1953. The company is mainly involved in the automotive, aerospace and industrial products sectors. The stock is also traded on the Frankfurt Stock Exchange (FUH).

Valorization

Subaru is trading at an attractive price right now, like many stocks in the automotive industry. The price is 12.5 times recurring earnings. The ratio is even 9.8 if we take the average earnings of the last five years, which vary quite significantly from one year to the next, which is explained by the cyclical nature of Subaru's business. Compared to tangible assets, the price is quite correct, with a ratio of 1.8. From a sales perspective, the valuation is attractive, with a ratio of only 0.8. As for free cash flow, the company is also trading at an attractive price, with a ratio of 12.6, and even 10.44 if we take the average of the last five years.

Du point de vue du dividende, le titre est très généreux, avec près de 4% de rendement. Le taux de croissance annuel moyen a été impressionnant ces cinq dernières années, à 24.57%, mais c'est grâce à la forte progression de 2014-2016, car par la suite le dividende est demeuré statique, à cause de la baisse concomitante du bénéfice. Malgré cela, le distribution ratio demeure encore à des niveaux assez corrects, puisqu'il se monte à 50% (par rapport aux bénéfices et au FCF).

Balance sheet & result

Just like the dividend, the value of assets, cash reserves and earnings are growing over the long term, which proves the strength of Subaru's business model. The Japanese company is clearly managing to create value for its shareholders, and this is reflected in the share price, which has increased sevenfold over the last ten years.

Cash reserves are comfortable, with a current ratio of 1.8 (down very slightly) and a liquidity ratio of 1.5. The company therefore has no problem meeting its current financial obligations.

There gross margin est assez bonne, et en légère hausse, à 28.3%, pour une marge de free cash flow correcte, de 6.45%. La rentabilité par contre est en baisse, à 7.64% par rapports aux actifs. Ceci demeure néanmoins à des niveaux corrects, ce qui se confirme par un ROE de 14.2% et une rentabilité en cash flow des actifs de 12.8%.

Debt has been steadily declining for years, to the point where it has become insignificant. Long-term debt thus represents 0.73% of assets. The entire debt, which represents only 0.06 times equity, could be repaid within 4 months using FCF.

The number of shares outstanding has been stable since 2017 and even decreased between 2016 and 2017.

Conclusion

Subaru is a nice company, with a fairly long history, decent gross margins, relatively low overheads, very little debt and fairly modest capital expenditures, despite the industry.

Certes, à cause de la nature des opérations de Subaru, ce n'est pas le genre de titres qu'on peut conserver les yeux fermés. Le beta de 1.3 est là pour nous le rappeler. Néanmoins, la volatility, avec 15.9%, demeure à des niveaux encore gérables pour ceux qui ont le cœur fragile. En même temps, il serait étonnant qu'il en soit autrement puisqu'il ne se passe pas grand chose avec le cours de Toyota depuis de très nombreux mois.

I bought this stock on July 26, 2017 and the price has barely moved since then. I believe that Subaru is currently trading at a price that fairly reflects its intrinsic value, with perhaps a very slight undervaluation. It is therefore a stock to hold in your portfolio, or to watch for a possible purchase.