January 11, 2024
Top 10 Stock Itochu Hold Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: Itochu – Top 10 Stock in Tokyo Stock Exchange TOPIX 100
Itochu is listed as a top 10 stock on January 11, 2024 in the market index TOPIX 100 because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. The company is growing above average and professional investor sentiment is positive. Both are encouraging signals for a stock purchase decision, albeit at an above-average share price. Based on the Obermatt 360° View of 29 (29% performer), Obermatt assesses an overall hold recommendation for Itochu on January 11, 2024.
Snapshot: Obermatt Ranks
| Country | Japan |
| Industry | Trading & Distribution |
| Index | TOPIX 100, Nikkei 225 |
| Size class | XX-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View Itochu Hold
| 360 METRICS | January 11, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 25 |
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| GROWTH | ||||||||
| GROWTH | 51 |
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| SAFETY | ||||||||
| SAFETY | 23 |
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| SENTIMENT | ||||||||
| SENTIMENT | 77 |
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| 360° VIEW | ||||||||
| 360° VIEW | 29 |
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ANALYSIS: With an Obermatt 360° View of 29 (better than 29% compared with alternatives), overall professional sentiment and financial characteristics for the stock Itochu are below the industry average. The 360° View is based on consolidating four consolidated indicators, with half of the metrics below and half above average for Itochu. The consolidated Growth Rank has a good rank of 51, which means that the company experiences above-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. This means that growth is higher than for 51% of competitors in the same industry. The consolidated Sentiment Rank also has a good rank of 77, which means that professional investors are more optimistic about the stock than for 77% of alternative investment opportunities. But the consolidated Value Rank has a less desirable rank of 25, which means that the share price of Itochu is on the higher side compared with typical size in indicators such as revenues, profits, and invested capital. This means the stock price is higher than for 75% of alternative stocks in the same industry. Finally, the consolidated Safety Rank has a riskier rank of 23, which means that the company has a financing structure that is riskier than those of 77% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. ...read more
RECOMMENDATION: With a consolidated 360° View of 29, Itochu is worse than 71% of all alternative stock investment opportunities based on the Obermatt Method. Only half of the consolidated Obermatt Ranks exhibit excellent performance, so one needs to take a close look. Growth is above-average (Growth Rank of 51), and professional market sentiment is positive (Sentiment Rank of 77), but value and safety are below average. The Safety Rank is the least significant of the four consolidated ranks, because it only reflects financing practices. In the case of high growth, aggressive financing is a good thing. So the question is: How to assess below-average value against above-average growth and sentiment? Growth may be the strongest driver of the investment rationale in this case, which is reflected in institutional investors' opinions. It is typical for growth companies to have low value, as is the case here. Investors are willing to pay more for companies that outperform their competitors. So the question is, how much do you sacrifice value for growth? You can use the following rule of thumb: If you take 100 minus the growth rank, you arrive at a possibly minimum level for the value rank. For example, if the growth rank is at 75, and the value rank is at 5, you should tread carefully. If the value rank is at 40, it still might be a good value if the growth rank is above 60. Sometimes market sentiment just extrapolates the past, but sometimes it reflects reality. You pay more than the market average for this stock, but it may be worth it. ...read more
Sentiment Strategy: Professional Market Sentiment for Itochu very positive
ANALYSIS: With an Obermatt Sentiment Rank of 77 (better than 77% compared with alternatives) for 2024, overall professional sentiment and engagement for the stock Itochu is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with half of the metrics below and half above average for Itochu. Analyst Opinions are at a rank of 48 (worse than 52% of alternative investments), which means that currently, stock research analysts tend to warn against investing in the stock of the company. But they are changing their opinions! Analyst Opinions Change has a rank of 68, which means that stock research experts are more positive in their investment recommendations in the company. In other words, they are getting more optimistic of stock investments in Itochu. More encouragingly, the Professional Investors rank is 100, which means that professional investors hold more stock in this company than in 100% of alternative investment opportunities. Pros tend to favor investing in this company. But Market Pulse is on the lower side with a rank of 19, which means that the current professional news and professional social networks are on the negative side when discussing this company (more negative news than for 81% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 77 (more positive than 77% compared with investment alternatives), Itochu has a reputation among professional investors that is significantly higher than that of its competitors. The sentiment signals are mixed for Itochu. While analysts and the news channels are negative, there is a change in what analysts think. Above-average institutional investors in this company support them. Sentiment signals remain mixed with analysts and news channels pessimistic, though improving, and professional investors above average. ...read more
Value Strategy: Itochu Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 25 (worse than 75% compared with alternatives), Itochu shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Itochu. Price-to-Profit (also referred to as price-earnings, P/E) is 64 which means that the stock price compared with what market professionals expect for future profits is lower than for 64% of comparable companies, indicating a good value concerning Itochu's profit levels. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with a Price-to-Book Rank of 26, which means that the stock price is lower as regards to invested capital than for 26% of comparable investments. On the other hand, Price-to-Sales is less favorable than 55% of alternatives (only 45% of peers have an even less favorable ratio). The same is valid for dividend yield, which is lower than 49% of comparable companies, making the stock more expensive as regards to the company's expected dividend payouts. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 25, is a hold recommendation based on Itochu's stock price compared with the company's operational size and dividend yields. This is a puzzling picture, because it means that profits are high while dividends are low. Since the stock price is low compared with invested capital but high in respect to expected revenues, it means that the company has more invested capital than peers for generating the same amount of revenue. Since profits are higher, it could be a "cash cow" situation (using the classic Boston Consulting BCG matrix naming convention) where the company is on a downward trend, still living from the profits of past products. As the company pays low dividends, it may harbor the opinion that a turnaround is possible, and it rather invests the cash than pay it out to shareholders, thus sealing the company's fate early. Any investment optimism should only be a buy trigger once thorough research is completed. ...read more
Growth Strategy: Itochu Growth Momentum good
ANALYSIS: With an Obermatt Growth Rank of 51 (better than 51% compared with alternatives), Itochu shows an above-average growth dynamic in its industry. Investors also speak of positive momentum. The Growth Rank is based on consolidating four value indicators, with three out of four indicators below average for Itochu. Sales Growth has a below market rank of 27, which means that, currently, professionals expect the company to grow less than 73% of its competitors. The same is valid for Capital Growth, with a rank of 36, and Profit Growth, with a rank of 48. Currently, professionals expect the company to grow its profits less than 52% of its competitors). Only shareholders are optimistic. Stock Returns are above average at a rank of 77, which means that the stock returns have recently been above 77% of alternative investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 51, is a buy recommendation for growth and momentum investors. That picture may be the result for a company that has reached the bottom. All went south for Itochu, and it still looks bad, but some investors already see light at the end of the tunnel, rewarding the stock with recent above-market stock returns. It could also mean that investors are correcting an overreaction to negative news. If that were the case, the positive stock returns are not yet a sign of recovery. Investors should look closely at the Value and Sentiment indicators before they make a stock purchasing decision, because growth is unlikely to be the driving argument behind this investment. ...read more
Safety Strategy: Itochu Debt Financing Safety risky
| SAFETY METRICS | January 11, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 32 |
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| REFINANCING | ||||||||
| REFINANCING | 21 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 44 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 23 |
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ANALYSIS: With an Obermatt Safety Rank of 23 (better than 23% compared with alternatives), the company Itochu has much riskier financing practices than comparable other companies, which means that their overall debt burden is significantly above the industry average. This doesn't mean that the business of Itochu is also risky, it only means that the company is on the riskier side in respect to bankruptcy in case things turn sour, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with all three metrics below average for Itochu. Liquidity is at 44, meaning that the company generates less profit to service its debt than 56% of its competitors. This indicates that the company is on the riskier side when it comes to debt service. Even worse, Leverage is at a rank of 32, meaning the company has an above-average debt-to-equity ratio. It has more debt than 68% of its competitors. Finally, Refinancing is at a rank of 21 which means that the portion of the debt about to be refinanced is above average. It has more debt in the refinancing stage than 79% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 23 (worse than 77% compared with alternatives), Itochu has a financing structure that is significantly riskier than that of its competitors. This combination is rather dangerous in most situations. Only very promising companies with bright future outlooks and stellar reputations can operate with such risky financing.
Combined financial peformance: Itochu Lowest Financial Performance
| COMBINED PERFORMANCE | January 11, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 25 |
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| GROWTH | ||||||||
| GROWTH | 51 |
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| SAFETY | ||||||||
| SAFETY | 44 |
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| COMBINED | ||||||||
| COMBINED | 13 |
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ANALYSIS: With an Obermatt Combined Rank of 13 (worse than 87% compared with investment alternatives), Itochu (Trading & Distribution, Japan) shares have lower financial characteristics compared with similar stocks. Shares of Itochu are low in value (priced high) with a consolidated Value Rank of 25 (worse than 75% of alternatives), and are riskily financed (Safety Rank of 23, which means above-average debt burdens) but show above-average growth (Growth Rank of 51). ...read more
RECOMMENDATION: A Combined Rank of 13, is a sell recommendation based on Itochu's financial characteristics. As the company Itochu shows low value with an Obermatt Value Rank of 25 (75% of comparable investments are less expensive), investors should look at the other ranks. In this case, growth is expected to be above-average, better than 51% of comparable companies (Obermatt Growth Rank is 51). This is a typical case. Companies with above average growth tend to cost more than stocks with slower growth expectations. If this is a high-growth company, the low Obermatt Safety Rank of 23 is a good sign. The more debt a well-performing company has, the higher the returns to shareholders. However, if growth turns negative or interest rates increase, high debt may become a burden. If you believe the future is bright for Itochu, even a low-value company (in terms of its key financial indicators) can be a good investment. ...read more
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