Tuesday, August 16, 2016

Even As China Looks Toward Automation, FANUC Seems Pricey

Fanuc (OTCPK:FANUY) (6954) is a pretty remarkable company and a testament to the value of figuring out those things you do very well and then just doing those things. There are good reasons that Fanuc is the global leader in factory automation equipment like CNC systems, robots, and controlled machine tools. Likewise, operating margins in the 30%'s don't come by accident, nor do returns on capital consistently ahead of the cost of capital.

All of that said, I can't love the stock right now. Yes, I own ABB (NYSE:ABB) shares and I'm sure there will be aficionados of lead paint lollipops to accuse me of talking down Fanuc because that will somehow "help" ABB. But the fact remains that capex investment related to smartphones is still soft, China is increasingly looking to homegrown automation solutions, and even growth assumptions in excess of what I project for ABB aren't enough to drive a compelling fair value for this industrial technology company.

Read the full article here:
Even As China Looks Toward Automation, FANUC Seems Pricey

2 comments:

sakusa said...

Thanks Stephen for another solid writeup!

Fanuc is one of my Buy n' Hold favorites, thanks to many of the traits you mentioned, particularly the solid track record of high quality in both products and financial results.

I love companies like this that are so good at doing the few things they do, that they are actually admired for it by customers -- yet you hardly hear about them!

Of course their balance sheet is very conservative, and Third Point tried to get them to loosen up last year. Have you seen any tangible benefits from that as yet?

Stephen Simpson, CFA said...

They are returning more cash to shareholders, but that doesn't really impact my valuation or how I look at the company. I have no problem with a conservative balance sheet!