Analyzing Itochu (OTCMKTS:ITOCY) and Monotaro (OTCMKTS:MONOY)

Itochu (OTCMKTS:ITOCY) and Monotaro (OTCMKTS:MONOY) are both consumer discretionary companies, but which is the better investment? We will contrast the two companies based on the strength of their risk, earnings, analyst recommendations, institutional ownership, valuation, dividends and profitability.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Itochu and Monotaro, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Itochu	0	1	1	2	3.25
Monotaro	0	1	0	0	2.00

Profitability

This table compares Itochu and Monotaro’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Itochu	N/A	N/A	N/A
Monotaro	9.70%	28.73%	18.93%

Dividends

Itochu pays an annual dividend of $0.16 per share and has a dividend yield of 1.2%. Monotaro pays an annual dividend of $0.13 per share and has a dividend yield of 1.1%. Itochu pays out 18.0% of its earnings in the form of a dividend. Monotaro pays out 28.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Itochu is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk & Volatility

Itochu has a beta of 0.63, meaning that its stock price is 37% less volatile than the S&P 500. Comparatively, Monotaro has a beta of 1.09, meaning that its stock price is 9% more volatile than the S&P 500.

Insider & Institutional Ownership

0.1% of Itochu shares are owned by institutional investors. Comparatively, 0.1% of Monotaro shares are owned by institutional investors. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Itochu and Monotaro”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Itochu	$98.47 billion	1.06	$5.63 billion	$0.89	14.79
Monotaro	$2.23 billion	2.71	$217.31 million	$0.46	26.57

Itochu has higher revenue and earnings than Monotaro. Itochu is trading at a lower price-to-earnings ratio than Monotaro, indicating that it is currently the more affordable of the two stocks.

Summary

Itochu beats Monotaro on 9 of the 15 factors compared between the two stocks.

About Itochu

ITOCHU Corporation engages in trading and importing/exporting various products worldwide. The company’s Textile segment produces and sells raw materials, threads, and textiles; and garments, home furnishings, and industrial materials, as well as trades in industrial textile and lifestyle products. Its Machinery segment engages in the plants, bridges, railways, and other infrastructure; power generation, transmission, transformation, and sale; water, environment and waste-related; ship trading; renewable and alternative energy; and waste recycling businesses. The company’s Metals & Minerals segment engages in development of metal and mineral resource; processing and steel products; trading of iron ore, coal, pig iron and ferrous raw materials, non-ferrous and light metals, steel products, nuclear fuels, and greenhouse gas emissions; and recycling and waste treatment activities. Its Energy & Chemicals segment trades in crude oil, petroleum products, LPG, LNG, natural gas, hydrogen, organic and inorganic chemicals, functional food, synthetic resins, packaging materials, household goods, fine chemicals, pharmaceuticals, and electronic materials, as well as engages in the solar and biomass power generation, electricity trading, and the energy storage cell businesses. The company’s Food segment produces, distributes, and retails food products. Its General Products & Realty segment produces and sells paper, pulp, natural rubber, tire, and wood products and materials; develops and operates real estate properties, such as housing, logistics facilities, and other projects; and offers logistics services. The company’s ICT & Financial Business segment offers IT, Internet related and venture capital, mobile telephone equipment, BPO, broadcasting and communications, entertainment and content, healthcare and preventive medicine outsourcing, and financial and insurance brokerage services. The company was founded in 1858 and is headquartered in Tokyo, Japan.

About Monotaro

MonotaRO Co., Ltd., together with its subsidiaries, operates an online MRO products store in Japan and internationally. The company offers safety protective equipment, work clothes, and safety shoes; logistics, storage, and packing supplies; tapes; safety, disaster prevention, and crime prevention products; safety signs; ship and fishing supplies; office supplies; office furniture/lighting/cleaning supplies; cutting tools and abrasives; measurement and surveying equipment; hand tools/electric and pneumatic tools; sprays, oils, greases, and paints; adhesives and repair materials; welding supplies; and piping and water related components/pumps/pneumatic and hydraulic equipment/hoses. It also provides mechanical parts; control equipment; soldering and anti-static products; architectural hardware, building materials, painting, and interior supplies; air conditioning and electrical equipment; electrical materials; screws, bolts, nails, and materials; automotive supplies; truck supplies; motorcycle supplies; bicycle supplies; scientific research and development supplies; clean room supplies; kitchen equipment and store supplies; agricultural and gardening supplies; and medical and nursing supplies. It serves factories, construction, automobile maintenance, and other industries. The company was formerly known as Sumisho Grainger Co., Ltd. and changed its name to MonotaRO Co., Ltd. in February 2006. The company was incorporated in 2000 and is headquartered in Osaka, Japan. MonotaRO Co., Ltd. operates as a subsidiary of Grainger Global Holdings, Inc.