COMPARATIVE BUSINESS ANALYSIS: Toyota Motor Corporation
Data as of: 12/24/2010

Company Description

TOYOTA MOTOR CORPORATION is a Japan-based company mainly engaged in the automobile business and financial business.The Company operates through three business segments. The Automobile segment is engaged in the design, manufacture and sale of car products including passenger cars, minivans and trucks, as well as the related parts and accessories. The Finance segment is involved in the provision of financial services related to the sale of the Company's products, as well as the leasing of vehicles and equipment. The Others segment is involved in the design, manufacture and sale of housings, as well as information and communication business.

Competitor Analysis

Toyota Motor Corporation operates within the Motor vehicles and car bodies sector. This analysis compares Toyota Motor with three other automobile manufacturers in Asia: Suzuki Motor Corporation (2010 sales of 2.47 trillion Japanese Yen [US$29.78 billion] of which 86% was Four-Wheeled Cars), Honda Motor Co., Ltd. (8.58 trillion Japanese Yen [US$103.46 billion] of which 76% was Automobile Business), and Nissan Motor Co Ltd (7.52 trillion Japanese Yen [US$90.66 billion] of which 93% was Automobiles).

Sales Analysis

During the year ended March of 2010, sales at Toyota Motor were ¥18.95 trillion (US$228.55 billion). This is a decrease of 7.7% versus 2009, when the company's sales were ¥20.53 trillion. The sales level in 2010 was fairly close to the level five years ago: in 2005, Toyota Motor had sales of ¥18.55 trillion. Contributing to the drop in overall sales was the 13.8% decline in Other, from ¥623.22 billion to ¥537.42 billion. There were also decreases in sales in Automotive (down 7.3% to ¥17.19 trillion) and Financial Services (down 9.6% to ¥1.23 trillion) .

Recent Sales at Toyota Motor
19
21
24
26
21
19
2005 2006 2007 2008 2009 2010
(Figures in Trillions of Japanese Yen)

The company derives most of its revenues in its home market of Japan: in 2010, this region's sales were ¥11.22 trillion, which is equivalent to 59.2% of total sales. On a geographical basis, contributing to the decline in the company's sales in 2010 were the declines in Europe, where sales dropped 25.7% to ¥2.15 trillion. Sales in North America were also lower, falling 7.0% (to ¥5.67 trillion) . However, not all regions experienced a decline in sales. Sales in Japan increased 50.2% (to ¥11.22 trillion). Sales also increased in Asia/Far East (up 8.4% to ¥2.66 trillion) and in Rest of the World (up 3.3% to ¥1.67 trillion) .

While Toyota Motor and all three comparable companies experienced declines in sales, the 7.7% drop at Toyota Motor was not as severe as the other three companies (which experienced declines between 10.9% and 17.8%).

The company currently employs 320,590. With sales of ¥18.95 trillion (US$228.55 billion) , this equates to sales of US$712,900 per employee. This is much higher than the three comparable companies, which had sales between US$575,156 and US$585,159 per employee.

Sales Comparisons (Fiscal Year ending 2010)
Company Sales
(trlns)
Sales
Growth
Sales/
Emp (US$)
Largest Region
Toyota Motor 18.951 -7.7% 712,900 Japan (59.2%)
Suzuki Motor Corporation  2.469 -17.8% 578,159 Japan (45.2%)
Honda Motor Co., Ltd.  8.579 -14.3% 585,159 North America (43.7%)
Nissan Motor Co Ltd  7.517 -10.9% 575,156 North America (35.7%)

Recent Stock Performance

Stock Performance Chart for Toyota Motor Corporation

In recent years, this stock has performed terribly. In fiscal year 2007, the stock traded as high as ¥8,350.00 , versus ¥3,225.00 on 12/24/2010.

For the 52 weeks ending 12/24/2010, the stock of this company was down 16.2% to

¥3,225.00 .
During the past 13 weeks, the stock has increased 5.4%. During the past 52 weeks, the stock of Toyota Motor has performed worse than the three comparable companies, which saw changes between -10.7% and 5.3%.

During the 12 months ending 9/30/2010, earnings per share totaled ¥176.85 per share. Thus, the Price / Earnings ratio is 18.24. These 12 month earnings are substantially greater than the earnings per share achieved during the last fiscal year of the company, which ended in March of 2010, when the company reported earnings of 66.79 per share. Note that the earnings number - includes a 0.79 pre-tax charge in fiscal year 2010.

This company is currently trading at 0.53 times sales. Toyota Motor is trading at 0.96 times book value. Since the price to book ratio is less than 1, this means that theoretically, the net value of the assets is greater than the value of a company as a going concern. The company's price to book ratio is lower than that of all three comparable companies, which are trading between 1.11 and 1.37 times book value.

Summary of company valuations (as of 12/24/2010).
Company P/E Price/
Book
Price/
Sales
52 Wk
Pr Chg
Toyota Motor 18.2 0.96 0.53 -16.20%
Suzuki Motor Corporation   22.9 1.15 0.46 -10.68%
Honda Motor Co., Ltd.   9.6 1.37 0.69 5.32%
Nissan Motor Co Ltd   13.5 1.11 0.44 -0.25%

The market capitalization of this company is ¥10.11 trillion (US$121.97 billion) . The capitalization of the floating stock (i.e., that which is not closely held) is ¥6.77 trillion (US$81.59 billion) .

Dividend Analysis

During the 12 months ending 9/30/2010, Toyota Motor paid dividends totalling ¥45.00 per share. Since the stock is currently trading at ¥3,225.00 , this implies a dividend yield of 1.4%. This company's dividend yield is higher than the three comparable companies (which are currently paying dividends between 0.6% and 1.1% of the stock price). The company has paid a dividend for 6 straight years. Toyota Motor last raised its dividend during fiscal year 2008, when it raised its dividend to ¥140.00 from ¥120.00.

During the same 12 month period ended 9/30/2010, the Company reported earnings of ¥176.85 per share. Thus, the company paid 25.4% of its profits as dividends.

Profitability Analysis

On the ¥18.95 trillion in sales reported by the company in 2010, the cost of goods sold totaled ¥15.27 trillion, or 80.6% of sales (i.e., the gross profit was 19.4% of sales). This gross profit margin is better than the company achieved in 2009, when cost of goods sold totaled 82.6% of sales.

Toyota Motor's 2010 gross profit margin of 19.4% was lower than all three comparable companies (which had gross profits in 2010 between 26.1% and 32.6% of sales).

The company's earnings before interest, taxes, depreciation and amortization (EBITDA) were ¥1.74 trillion, or 9.2% of sales. This EBITDA margin is better than the company achieved in 2009, when the EBITDA margin was equal to 4.8% of sales.

In 2010, earnings before extraordinary items at Toyota Motor were ¥209.46 billion, or 1.1% of sales. This profit margin is an improvement over the level the company achieved in 2009, when the profit margin was -2.1% of sales.

The company's return on equity in 2010 was 2.1%. This was significantly better than the -3.7% return the company achieved in 2009. (Extraordinary items have been excluded).

Profitability Comparison
Company Year Gross
Profit
Margin
EBITDA
Margin
Earns
bef.
extra
Toyota Motor2010 19.4% 9.2% 1.1%
Toyota Motor2009 17.4% 4.8% -2.1%
Suzuki Motor Corporation 2010 28.8% 9.0% 1.2%
Honda Motor Co., Ltd. 2010 32.6% 11.6% 3.1%
Nissan Motor Co Ltd 2010 26.1% 12.9% 0.6%

Toyota Motor reports profits by product line. During 2010, the itemized operating profits at all divisions were ¥147.52 billion, which is equal to 0.8% of total sales. Of all the product lines, Financial Services had the highest operating profits in 2010, with operating profits equal to 20.1% of sales. (However, Financial Services only accounts for 6% of total sales at Toyota Motor).

Automotive had the lowest operating profit margin in 2010, with the operating profit showing a loss equivalent to 0.5% of sales. (This product line is the largest product line at Toyota Motor, accounting for approximately 91% of sales in 2010). However, in 2009, Financial Services had the lowest profit margin (-5.3% of sales versus -2.1% for Automotive).

Inventory Analysis

As of March 2010, the value of the company's inventory totaled ¥1.42 trillion. Since the cost of goods sold was ¥15.27 trillion for the year, the company had 34 days of inventory on hand (another way to look at this is to say that the company turned over its inventory 10.7 times per year). Although the inventory level dropped by ¥37.02 billion during FY2010, there was an increase in days in inventory from March 2009, when the company had ¥1.46 trillion, which was 31 days of sales in inventory.

The 34 days in inventory is lower than the three comparable companies, which had inventories between 49 and 59 days at the end of 2010.

Research and Development

Research and Development Expenses at Toyota Motor in 2010 were ¥725.35 billion, which is equivalent to 3.8% of sales. In 2010, R&D expenditures dropped both as a percentage of sales and in actual amounts: In 2009, Toyota Motor spent ¥904.08 billion on R&D, which was 4.4% of sales.

This company's R&D expenditures in 2010 were less than all three companies as a percentage of sales: Suzuki Motor Corporation spent 4.4% of its sales on R&D, Honda Motor Co., Ltd. spent 5.4%, and Nissan Motor Co Ltd spent 5.1%.

A large portion of the profits that Toyota Motor reported in 2010 are a result of its cut in R&D expenditures.
In 2009, the company spent ¥904.08 billion, which is ¥178.73 billion higher than what it spent in 2010. If Toyota Motor had spent the same amount on R&D in 2010 as it spent in 2009, it would have reported profits that were approximately 59% lower (ordinary income before taxes would have been ¥123.39 billion instead of ¥302.12 billion).

Financial Position

As of March 2010, the company's long term debt was ¥7.02 trillion and total liabilities (i.e., all monies owed) were ¥19.30 trillion. The long term debt to equity ratio of the company is 0.64.

As of March 2010, the accounts receivable for the company were ¥6.46 trillion, which is equivalent to 124 days of sales. This is higher than at the end of 2009, when Toyota Motor had 100 days of sales in accounts receivable.

Financial Positions
Company Year LT Debt/
Equity
Days
AR
Days
Inv.
R&D/
Sales
Toyota Motor 2010 0.64 124 34 3.8%
Suzuki Motor Corporation 2010 0.31 36 49 4.4%
Honda Motor Co., Ltd. 2010 0.53 84 59 5.4%
Nissan Motor Co Ltd 2010 0.88 155 53 5.1%

Note that some of the financial ratios stated within this analysis may be distorted because of sales in financing, leasing, etc., which can distort certain ratios. At Toyota Motor, sales of Financial Services totaled ¥1.23 trillion, which was equal to 6.47% of sales in 2010.


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