September 21, 2023
Top 10 Stock Komatsu Hold Recommendation

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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 Komatsu Hold

360 METRICS	September 21, 2023
VALUE
VALUE	59
GROWTH
GROWTH	25
SAFETY
SAFETY	42
SENTIMENT
SENTIMENT	78
360° VIEW
360° VIEW	44

ANALYSIS: With an Obermatt 360° View of 44 (better than 44% compared with alternatives), overall professional sentiment and financial characteristics for the stock Komatsu are below the industry average. The 360° View is based on consolidating four consolidated indicators, with half the metrics below and half above average for Komatsu. The consolidated Value Rank has an attractive rank of 59, which means that the share price of Komatsu is on the lower side compared with the typical size in indicators such as revenues, profits, and invested capital. This means that the stock price is lower than for 59% of alternative stocks in the same industry. The consolidated Sentiment Rank has a good rank of 78, which means that professional investors are more optimistic about the stock than for 78% of alternative investment opportunities. But the consolidated Growth Rank has a low rank of 25, which means that the company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth, and stock returns. The consolidated Safety Rank has a riskier rank of 42, meaning the company has a riskier financing structure than 58 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 44, Komatsu is worse than 56% of all alternative stock investment opportunities based on the Obermatt Method. Half of the consolidated Obermatt Ranks exhibit above-average performance, but the other half are below market levels. The company enjoys a good value (Value Rank of 59) and positive market sentiment in the professional investor community (Sentiment Rank of 78), but growth expectations are below-average (Growth Rank of 25) and the financing structure is on the risky side(Safety Rank of 42). This combination is rather dangerous, because high debt levels (low safety) require growth to finance the debt burden. The current low growth level may be temporary, because professionals are actually optimistic (positive sentiment). Good value is sometimes an indication that the company's future is challenging. The below-par growth performance may be the reason for this assessment. Companies with less growth typically have a lower price than fast-growing competitors. Even though professional investor sentiment is strong, we recommend further evaluating whether the future of Komatsu is as challenging as the stock's low price suggests. Since the professional community is optimistic, the stock might just be going through a more challenging phase now, indicating that timing might be good now. ...read more

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Sentiment Strategy: Professional Market Sentiment for Komatsu very positive

SENTIMENT METRICS	September 21, 2023
ANALYST OPINION
ANALYST OPINION	59
OPINIONS CHANGE
OPINIONS CHANGE	80
PRO HOLDINGS
PRO HOLDINGS	98
MARKET PULSE
MARKET PULSE	23
CONSOLIDATED RANK: SENTIMENT
CONSOLIDATED RANK: SENTIMENT	78

ANALYSIS: With an Obermatt Sentiment Rank of 78 (better than 78% compared with alternatives) for 2023, overall professional sentiment and engagement for the stock Komatsu is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for Komatsu. Analyst Opinions are at a rank of 59 (better than 59% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. In addition, Analyst Opinions Change has a rank of 80, which means that stock research experts are changing their opinions for the better in recommending investing in the company. In other words, they are getting even more optimistic about investments in Komatsu. Finally, the Professional Investors rank is 98, which means that currently, professional investors hold more stock in this company than in 98% of alternative investment opportunities. ...read more

RECOMMENDATION: With a consolidated Sentiment Rank of 78 (more positive than 78% compared with investment alternatives), Komatsu has a reputation among professional investors that is significantly higher than that of its competitors. Pros tend to favor investing in this company. But there is also a signal for caution. Market Pulse has a rank of 23, which means that the current professional news and professional social networks tend to be negative when discussing this company (more negative news than for 77% of competitors). This could mean future risks and should make investors careful. Attention to negative news for Komatsu is worthwhile because they may be early warning signals. Without those, all other professional signals are encouraging, especially since analysts are getting more optimistic. ...read more

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Value Strategy: Komatsu Stock Price Value better than average

VALUE METRICS	September 21, 2023
PRICE VS. REVENUES (P/S)
PRICE VS. REVENUES (P/S)	46
PRICE VS. PROFITS (P/E)
PRICE VS. PROFITS (P/E)	72
PRICE VS. CAPITAL (Market-to-Book)
PRICE VS. CAPITAL (Market-to-Book)	40
DIVIDEND YIELD
DIVIDEND YIELD	98
CONSOLIDATED RANK: VALUE
CONSOLIDATED RANK: VALUE	59

ANALYSIS: With an Obermatt Value Rank of 59 (better than 59% compared with alternatives), Komatsu shares are more attractively priced than the majority of comparable stocks. The Value Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Komatsu. Price-to-Profit (also referred to as price-earnings, P/E) is 72 which means that the stock price compared with what market professionals expect for future profits is lower than for 72% of comparable companies, indicating a good value concerning Komatsu'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 40, which means that the stock price is lower as regards to invested capital than for 40% of comparable investments. On the other hand, Price-to-Sales is less favorable than 54% of alternatives (only 46% of peers have an even less favorable ratio). The same is valid for dividend yield, which is lower than 2% 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 59, is a buy recommendation based on Komatsu'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

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Growth Strategy: Komatsu Growth Momentum low

GROWTH METRICS	September 21, 2023
REVENUE GROWTH
REVENUE GROWTH	13
PROFIT GROWTH
PROFIT GROWTH	59
CAPITAL GROWTH
CAPITAL GROWTH	10
STOCK RETURNS
STOCK RETURNS	85
CONSOLIDATED RANK: GROWTH
CONSOLIDATED RANK: GROWTH	25

ANALYSIS: With an Obermatt Growth Rank of 25 (better than 25% compared with alternatives), Komatsu shows a below-average growth dynamic in its industry. There is limited momentum in this company. The Growth Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Komatsu. Profit Growth has a rank of 59, which means that currently professionals expect the company to grow its profits more than 59% of its competitors. This is a good sign for shareholders, which is confirmed by an above-average Stock Returns rank of 85 (above 85% of alternative investments). But Sales Growth has a below the median rank of 13, which means that, currently, professionals expect the company to grow less than 87% of its competitors, and Capital Growth also has a lower rank of 10. ...read more

RECOMMENDATION: The overall picture with a consolidated Growth Rank of 25, is a hold recommendation for growth and momentum investors. Because revenues and invested capital are the more solid growth indicators, the positive development on the profit side is less relevant. It may have been caused by cost-cutting, which may be a negative growth indicator. Finally, the above-average stock returns recently are a thing of the past and not a good indicator of future returns. Investors should be confident that the cost-cutting initiative leading to higher profits is to benefit the company's future. If not, there is little growth momentum, and investment is only advisable if the Value Ranks suggest a good investment timing for Komatsu. ...read more

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Safety Strategy: Komatsu Debt Financing Safety below-average

SAFETY METRICS	September 21, 2023
LEVERAGE
LEVERAGE	37
REFINANCING
REFINANCING	60
LIQUIDITY
LIQUIDITY	32
CONSOLIDATED RANK: SAFETY
CONSOLIDATED RANK: SAFETY	42

ANALYSIS: With an Obermatt Safety Rank of 42 (better than 42% compared with alternatives), the company Komatsu has financing practices on the riskier side, which means that their overall debt burden is above the industry average. This doesn't mean that the business of Komatsu 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 just one indicator above average for Komatsu and the other two below average. Refinancing is at 60, meaning the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 60% of its competitors. But Leverage is high with a rank of 37, meaning the company has an above-average debt-to-equity ratio. It has more debt than 63% of its competitors. Liquidity is also on the riskier side with a rank of 32, meaning the company generates less profit to service its debt than 68% of its competitors. ...read more

RECOMMENDATION: With a consolidated Safety Rank of 42 (worse than 58% compared with alternatives), Komatsu has a financing structure that is riskier than that of its competitors. A good Refinancing Rank means that the problems of the company may not be around the corner. But high Leverage is only good if things go well, and low Liquidity is a signal for caution. The financing signals for Komatsu are on the riskier side, requiring the company's future to be on the safer side. Investors may want to look at Growth and Sentiment ranks before making an investment decision. ...read more

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Combined financial peformance: Komatsu Below-Average Financial Performance

COMBINED PERFORMANCE	September 21, 2023
VALUE
VALUE	59
GROWTH
GROWTH	25
SAFETY
SAFETY	32
COMBINED
COMBINED	29

ANALYSIS: With an Obermatt Combined Rank of 29 (worse than 71% compared with investment alternatives), Komatsu (Heavy Machinery, Japan) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Komatsu are a good value (attractively priced) with a consolidated Value Rank of 59 (better than 59% of alternatives) but show below-average growth (Growth Rank of 25), and are riskily financed (Safety Rank of 42), which means above-average debt burdens. ...read more

RECOMMENDATION: A Combined Rank of 29, is a hold recommendation based on Komatsu's financial characteristics. As the company Komatsu's key financial metrics exhibit good value (Obermatt Value Rank of 59) but low growth (Obermatt Growth Rank of 25) and risky financing practices (Obermatt Safety Rank of 42), it may be a risky investment, because debt in times of crises can make things worse. The good value, better than 59% of comparable companies, may indicate the company's future is challenging. If you believe that low growth is temporary or just due to a specific current event, you may conclude that the good value of the stock provides an attractive investment opportunity. ...read more

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