P/E Ratios at Japanese Electronics Companies

NEC is delinquent in its annual filing with the Nasdaq and now faces a possible delisting. Sony, Hitachi and Pioneer will delay their full year earnings releases by a few weeks due to complexities related to Sarbox. What better time than now to take a look at valuations.

Below I have gathered the trailing, forward (for the year-ending this Mar. 31) and five-year average price-to-earnings ratios for the ordinary shares of eight of Japan's largest electronics firms.

One point to keep in mind is some of these firms (Sony, Hitachi and Toshiba) are really conglomerates, but still have large electronics businesses.

Canon (CAJ), Matsushita (MC), Sony (SNE), and Hitachi (HIT) are listed on the NYSE. NEC (NIPNY) trades on the Nasdaq -- at least for now.

Fujitsu (FJTSY), Sharp (SHCAY) and Toshiba (TOSBF) trade on the pink sheets.

In the chart below, I also included their respective market caps, plotted as an orange-colored box with the rounded US$ value (converted at ¥117.1/$1) underlined.

Click to enlarge chart

What you'll notice is Canon, by far the largest in terms of market cap, is also the cheapest when measured by its trailing P/E ratio and five-year average P/E. Given the double digit returns of both Canon and especially recently for Sony, we see that both have a higher F/P/E than their trailing P/E. In fact, notice Canon's F/P/E is nearly double its 5-year average. However, this could easily change with upcoming earnings releases and new/revised forecasts.

At the other end of the spectrum is troubled NEC. If it pulls itself together, it could fit more in-line with its peers in terms of valuation and appears it will trade below its 5-year average P/E into the next fiscal year.

The most promising play on a F/P/E basis is Toshiba, which is currently pricey on a trailing basis, but is closer to its five-year average when looking forward. Fujitsu and Sharp also look as if they are less pricey than rivals on a forward basis, although Sharp has clearly gotten ahead of its five-year average.

Growth expectations at Matsushita remain high. It seems to me that any profit taking in Sony would create a logical investment switch to Matsushita, which has nearly half the F/P/E, if one wanted to stick with Japanese electronics.

Note: Use this data as a supplement to your own research and always review other valuation metrics.

Disclosure: The author does not own shares of any companies mentioned in this article.

Comments

[7c-ranch]

Thank you.