Picture This: Canon Keeps Growing

As those who follow my blog know, one of my hobbies is photography. As such, I follow and have invested in Canon Inc. (CAJ). During this past year, Canon has introduced two new professional cameras: EOS-1D Mark III, which retails for $4,495.95 at B & H; and EOS-1Ds Mark III, which retails for $7,999.95 at B & H. B & H is short for B & H Photo – Video – ProAudio.

The first camera was introduced during the Spring and the second camera was introduced this Fall and began shipping only a few days ago. The demand for both cameras outstrips the supply. That is, if you want one of these professional cameras, you have to go on a waiting list.

Of course, these professional cameras require lots of memory. Moreover, they require large and powerful computers and disk drives to process and save the large image files. While I do not invest in many computer related technology stocks, I believe that the demand for these products is still healthy.

And, as a side note, for those interested in learning more about these professional cameras and photography in general, I highly recommend joining Pro Photo HOME, an online photography site dedicated to the professional and serious amateur. The participants are friendly, knowledgeable and helpful—there is very little of the traditional internet noise.

While I think that the consumer slowdown will negatively affect camera sales, Canon's projections, available on the investor relations section of its website, still show healthy growth for the fourth quarter of about 13% by sales and 20% by units. Please note, although I discussed two professional cameras, the overwhelming majority of Canon's camera sales by units are point and shoot cameras. Digital SLRs (single lens reflex) sales by unit volume are a small fraction of the overall sales; however, they are more expensive and thus constitute a significant portion of the revenue.

As shown by this Yahoo's five year chart of Canon's stock price, the company shows reasonably steady growth. It has five main groups of products: 1) Office Imaging; 2) Computer Peripherals; 3) Business Information; 4) Cameras; and 5) Optical and Other. I do not understand the optical portion well, though it is one of the smaller groups. Camera sales constitute about 26% of Canon's overall sales and operating profit. The company is not widely followed in North America with only two or three analysts providing earnings and revenue estimates on Yahoo's financial site.

I have included some key statistics from Yahoo as of 5 December 2007:

• Market Cap (intraday): 68.43B
• Enterprise Value (6-Dec-07): 59.93B
• Forward P/E (fye 31-Dec-08): 13.80
• PEG Ratio (5 yr expected): 1.43
• Enterprise Value/EBITDA: 6.232
• Profit Margin (ttm): 10.96%
• Operating Margin (ttm): 17.12%
• Return on Assets (ttm): 11.12%
• Return on Equity (ttm): 17.14%
• Revenue (ttm): 39.89B
• Gross Profit (ttm): 13.31B
• EBITDA (ttm): 9.62B
• Beta: 0.67
• Total Debt/Equity (mrg): 0.008
• Current Ratio (mrg): 2.092

As the figures show, the company is conservatively financed. Overall, my general impression is that the company is well managed and provides excellent products and services.

Disclosure: I am long Canon stock.