Mizuno Corp. (8022) + 140% P/E 16.7x vs. Asics (7936) + 150% P/E 36X: which is a better stock?
Mizuno and Asics, the two leading sports goods manufacturers in Japan, have a long history of operation. Mizuno was founded in 1923 and Asics in 1943.
My initial intention for this report was to demonstrate two key points:
- Mizuno is cheaper than Asics for a good reason.
- Mizuno can address the reasons for its lower valuation and thus improve its share prices.
However, when comparing Mizuno and Asics, I conclude that these are two distinct stocks, each operating with different objectives. Therefore, both can have a place in portfolios, but they should align with different types of investment goals.
The major differences between the two lie in their corporate philosophies, business models, and attitudes toward shareholders.
Both stocks have performed well this year with Asics up 150 % and Mizuno up 140%.
I believe that stock drivers are:
- A renewed interest in sports among the Japanese after Japan won 20 gold medals in the Paris Olympics, the third behind US and China. The total medal count was 45.
Asics commented that they have achieved the goal of “winning medals” at the Olympics. In tennis, Mr. Novak Djokovic won the gold medal. Asics also provided shoes to skateboarder Ms. Riz Akama, who won the silver.
2. The global sporting goods market is projected to grow: It was valued at approximately $535 Bn in 2023. The market is expected to reach $800 Bn by 2036, growing at a CAGR of 4% from 2024 to 2036. Some more optimistic estimates project the market to reach $1.65 Tn. by 2033, with a CAGR of 8.6%.
The cited key drivers for this industry’s growth are:
- Increasing health and fitness awareness
- Growing participation in sports and recreational activities
- Rising disposable income, especially in emerging economies
- Technological advancements in sports equipment
- Expanding e-commerce channels for sports goods
(Source: Research Nester)
3. Economic insensitivity: Many consumers prioritize health spending even during economic downturns. Some investors remain uncertain if the US FED has achieved a “soft landing,” raising concerns about a future recession. During recessions, shoe manufacturers can be considered “defensive” as consumers continue to invest in their health. For instance, Asics sold 22.5% more shoes year-over-year in China, despite weak economic indicators in the first half of 2024
Even after the huge upside this year, Mizuno and Asics trade at widely different valuations.
Mizuno: P/E 16.7x, P/B 1.63x
Asics: P/E 36x, P/B 7.95x
This valuation gap is mainly due to the faster growth of Asics.
Asics has significantly outperformed Mizuno in terms of operating profit growth over the past 5-6 years, with a CAGR of 38.8% compared to Mizuno’s 13.6%. Several key factors likely contributed to this CAGR difference.
I outline factors which has led to this growth difference and the investment merits for both stocks in the note which is available for purchase. Please DM me.