Japanese trading company Itochu (OTCPK:ITOCY)
has a tough act to follow - its own meaningful improvement over the
past five years. The company was more willing than most of its Japanese
trading peers to deemphasize commodity/resource businesses, and it moved
fairly quickly here, building up non-resource businesses like its food,
“machinery”, and finance operations. Those moves have led to better ROE
and cash flow margin performance versus its peers, and Itochu shares
have done well relative to peers like Mitsui (OTCPK:MITSY), Mitsubishi (OTCPK:MSBHY), Marubeni (OTCPK:MARUY), and Sumitomo (OTCPK:SSUMY) over that time.
Itochu’s
execution has not been flawless, though, and investors are right to
worry about the risk of another sizable poor investment (like CITIC (OTCPK:CTPCY)),
not to mention the risk of lower long-term returns as Itochu has
de-risked its business. I believe its underlying business mix, and the
investment priorities that have been demonstrated over the last couple
of years, argue for a higher price today, but the upcoming announcement
of the company’s next three-year plan could be a significant share
mover.
Read the full article here:
The Market Still Isn't Giving Itochu Full Credit For Its Self-Improvement
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