2 Outperforming Japanese Stocks With Encouraging Sales Trends

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 |  Includes: NJ, SNE
by: Kapitall

Last week, Japan reported a 3.5% annualized GDP growth rate in the first quarter of the year. CNN reports that the Organization for Economic Cooperation and Development (OECD) is also optimistic about the country's economic outlook, forecasting a modest rise in Japanese consumer price by the end of this year and a 2.4% inflation rate by the end of 2014. With Japan hopefully making strides towards economic recovery, we wanted to find Japanese stocks that are similarly positioned to have a bright future.

We started with a universe of Japanese stocks and screened for those that have outperformed over the last quarter, with over 15% return.

Next, we screened for stocks with strong sales trends, comparing growth in revenue to growth in a in order to find a fundamental reason for the stocks' performances. We compared growth in revenue to growth in accounts receivable. Since accounts receivable are the portion of revenue not yet received, and there is no guarantee the money will ever be received, the smaller the portion of revenue made up of receivables, the healthier the company's revenue. We screened for stocks seeing faster growth in revenue than accounts receivable year-over-year, as well as accounts receivable comprising a smaller portion of current assets over the same time period.

The List

For an interactive version of this chart, click on the image below. Average analyst ratings sourced from Zacks Investment Research.

Do you expect these stocks to continue to outperform? Use this list as a starting point for your own analysis.

1. Nidec Corp. (NYSE:NJ): Engages in the design, development, manufacture, and marketing of small precision motors, mid-size motors, machinery, and electronic and optical components.

  • Market cap at $9.82B, most recent closing price at $16.92.
  • Performance over the last quarter at 15.34%.
  • Revenue grew by 11.02% during the most recent quarter ($186,060M vs. $167,587M y/y). Accounts receivable grew by -12.81% during the same time period ($159,085M vs. $182,462M y/y). Receivables, as a percentage of current assets, decreased from 41.54% to 31.77% during the most recent quarter (comparing 3 months ending 2013-03-31 to 3 months ending 2012-03-31).

Nidec has performed in line with the rest of its industry since 4/29/13, returning 1.08% over the last month. While the company's performance surpasses competitors Regal Beloit Corporation (NYSE:RBC) and Exide Technologies (XIDE), it falls short of industry leaders EnerSys (NYSE:ENS) and Littelfuse Inc. (NASDAQ:LFUS), which returned 9.13% and 7.80% respectively.

On the other hand, Nidec's EPS grew by -83.30% over the last year. This is considerably weaker than competitors Exide Technologies and EnerSys, which saw 112.55% and 29.09% in EPS growth, respectively. The electric motor manufacturer's 5 year EPS growth is 19% and is higher than peers Exide Technologies and Littelfuse Inc's 5 year EPS growth of 10%.

Earlier this month, the Motley Fool examined Nidec's inventory levels and saw that TTM revenue increased by 3.9% while TTM inventory grew by 9.2%. Between the fourth quarter of 2012 and first quarter of 2013, revenue grew by 0.7% and inventory fell by 13.7%. The fastest-growing inventory segment was raw materials, which grew by 6.4% on a trailing-12-month basis. Since an increase in raw materials can indicate that a company anticipates a growth in demand, Nidec's inventory growth isn't particularly troubling - especially since growth in revenue is outpacing growth in accounts receivable.

2. Sony Corporation (NYSE:SNE): Designs, develops, manufactures, and sells electronic equipment, instruments, and devices for consumer, professional, and industrial markets worldwide.

  • Market cap at $20.34B, most recent closing price at $20.10.
  • Performance over the last quarter at 40.17%.
  • Revenue grew by 8.29% during the most recent quarter ($1,733,029M vs. $1,600,426M y/y). Accounts receivable grew by -4.86% during the same time period ($992,259M vs. $1,042,968M y/y). Receivables, as a percentage of current assets, decreased from 27.78% to 27.21% during the most recent quarter (comparing 3 months ending 2013-03-31 to 3 months ending 2012-03-31).

The past month has been great for Sony. The company's stock has returned 21.38% since April 29th, beating Harman International Industries Inc. (NYSE:HAR) and Dolby Laboratories, Inc. (NYSE:DLB), which returned 18.76% and 9.12% during the same holding period.

Sony has a higher than average projected earnings growth rate over the next 5 years (52.40%). This is higher than the likes of Dolby Laboratories, Inc. (projected EPS growth over next 5 years at 10.0%) and Spectrum Brands Holdings, Inc. (projected EPS growth over next 5 years at 10.0%).

Bloomberg reports that Sony is considering billionaire Daniel Loeb's proposal of selling off its profitable entertainment business to raise cash, drive up its stock price, and repair its electronics unit. The electronics unit has reported losses for nine consecutive years, and The New York Times notes that stiff smartphone and television competition remain a challenge for the company. On the electronics front, Sony recently launched its new Xperia Z Tablet, making it the latest addition to the Android tablet market. Android Authority reports that the tablet sold out in pre-orders in France, Germany, Hong Kong, Japan, and Taiwan. Tablets are incredibly popular, with Mashable writing that 229 million units are expected to ship this year, a 59% increase from 144.5 million last year, so the reception to the Xperia Z is definitely worth monitoring.

*Accounting data sourced from Google Finance. All other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Business relationship disclosure: Kapitall is a team of analysts. This article was written by Mary-Lynn Cesar, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.