Ryobi (5851): Every Boomer's dream company trading at a dirt-cheap valuation

Disclaimer: This stock analysis is for informational purposes only and does not constitute financial advice. Always do your own research or consult a financial advisor before making investment decisions. Investing in stocks involves risks, including potential loss of principal. Past performance is not a guarantee of future results.

Imagine a world where boomer men get as excited about leaf blowers and lawn mowers as teenage girls at a Taylor Swift concert.

Well, welcome to the Ryobi (5851 JP) fan club—a company that has captured the hearts of weekend warriors across the globe with its iconic hardware tools.

While those boomer dads are swooning over power tools, they’re completely unaware that Ryobi’s real bread and butter lies in its automotive die-casting business. Despite being a leader in this crucial manufacturing sector, Ryobi’s stock is trading at a valuation that’s almost criminally low. Let’s break down what makes this a stock worth watching, especially if you like companies with a strong moat in a profitable niche.

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Summary

• Hidden Value: Known for power tools, Ryobi’s main strength is its automotive die-casting business, making up 87.6% of sales, but it trades at an undervalued price.

• Leader in Die-Casting: Ryobi supplies aluminum parts to major automakers like Toyota and Ford, positioning itself to benefit from the growing hybrid vehicle market.

• Innovating for the Future: With investments in giga casting and expanded operations in Mexico, Ryobi is prepared for increased demand for hybrid and electric vehicle components.

• Financial Health: Projected sales of ¥305 billion in 2024, a strong equity ratio of 47.5%, and an undervalued P/B ratio of 0.4x make Ryobi a strong potential value play.

• Risks: Exposure to the automotive sector and rising costs may challenge growth, particularly if the shift to fully electric vehicles accelerates.

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Table of Contents
1. Company Overview
2. Investor Thesis
3. Valuation
4. KonichiValue Score

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1. Company Overview