Founded in 1947, ESPEC Corp. (“Espec” or the “company”) developed and launched Japan’s first environmental test equipment in 1961 (63 years of history).

While small with ¥76 Bn in market cap, Espec dominates the environmental test industry in Japan with a 60% domestic market share. Its global market share has also reached 30% (according to the company’s estimate), making it one of the two biggest manufacturers competing with a German company.

The company’s environmental testers are used to analyze the impact of environmental changes such as temperature, humidity, and vibration.

Environmental testing is often mandated by international standards, as well as national and industry regulations, and product development companies must conduct it. Thus, the company supports pretty much all new product launches.

For this global niche status, the company trades at a P/E of 14.31x and a P/B of 1.29x.  Dividend yield is decent at 2.5%. The test equipment leader, Shimadzu, trades at P/E at 21x and P/B at 2.4x. Is this valuation gap justified?  I have discussed this in my detailed report which is available for purchase.