At the end of January, Fool contributor Nathan Parmelee wrote a nice article about one leading Japanese factory automation company in his real money stock pick. It is Fanuc Corp (TYO:6954). Since the beginning of 2009, Fanuc’s stock price has consistently increased, from around $10 per share to $25 per share. Let’s take a closer look at Fanuc to see whether or not investors should get into it at its current price.
Fanuc Corp (TYO:6954), founded in 1956, is considered one of the biggest makers of industrial robots in the world, with operations in more than 22 countries. Its name is actually the abbreviation of the term Factory Automatic Numerical Control. It has three main business groups: FA Group, Robot Group, and Robomachine Group.
The majority of its sales, ¥267.6 ($2.82) billion, or 49.7% of total 2012 net sales, were generated from the FA Group. The Robomachine Group ranked second with ¥156.2 ($1.65) billion in revenue, accounting for 29% of Fanuc’s total revenue, while the Robot Group contributed ¥114.7 ($1.21) billion in 2012 sales. The majority of its sales in terms of geography came from Asia at ¥268 ($2.83) billion, while Japan was the second largest revenue contributor with ¥126.8 ($1.34) billion in revenue. Fanuc seems to have a diverse customer base as no single customer accounted for more than 10% of its total sales.
Consistent performance with no debt
In the past ten years, Fanuc Corp (TYO:6954) has witnessed rising top line and bottom line. Its revenue increased from ¥214.3 ($2.26) billion to ¥538.5 ($5.68) billion in 2012, while net income rose from ¥39.5 billion ($417 million) to ¥138.8 ($1.46) billion during the same period. Interestingly, its operating income has moved up 50% in the last ten years, from 28% to 41.2%.
What makes me interested in the company is the fact that Fanuc is a cash cow. Since 2003, its operating cash flow increased from ¥48.9 billion ($516 million) to ¥144.2 ($1.52) billion, and free cash flow rose from ¥41.5 billion ($438 million) to more than ¥100 ($1.05) billion. Interestingly, the improving operating performance was achieved without the help of any leverage. As of December 2012, it had ¥1 trillion ($10.55 billion) in total stockholders’ equity, ¥674.4 ($6.83) billion in cash and no debt.