Investing in Suntory: Any Red Flags?
A follow-on analysis of Suntory's financial health through revenue growth, debt management, and cash flow, looking for red flags before investing.
Disclaimer: This is how I view these stocks based on my personal preferences and risk appetite. You might disagree. I'm sharing it for informational and educational purposes. Based on this analysis I bought Suntory shares.
Previously I mentioned buying shares in Suntory after an analysis of Japan's big four drinks companies, but I skipped talking about a further piece of analysis I do before pulling the trigger. In effect I have two steps:
- Compare valuation and quality metrics for a small group of similar companies, looking for unloved gems in a micro-sector.
- If something promising pops up, look for possible red flags, i.e. reasons not to invest.
So does Suntory have any red flags? I know this is not exhaustive but there are three things I look for:
- Is revenue dropping?
- Is debt out of control?
- Is cash flow negative?
Annual Revenue
Very healthy! Consistent revenue growth which would make Benjamin Graham happy, and me too.
Debt to Total Assets Ratio
Another happy chart. While debt itself is not necessarily a bad thing, the management team have clearly made an effort to bring down debt and it's worked.
Free Cash Flow per Share
Consistently positive and relatively flat. The company is generating cash at a steady pace, with more than enough to cover its present dividend of ¥120 a year.
Final Decision
With no concerns from these metrics, and a positive outcome from the previous group analysis, I felt comfortable investing in Suntory (¥4,454/share on 2025-07-16). It may not be right for you (we probably have different risk profiles), and I may be wrong and we'll see the share price plummet, but hopefully sharing this thought process at least provides food for thought.
Notes
I use the Japanese version of Trading View (no affiliation) for my analysis, which for Japanese stocks seems to have more data than the English version for some reason.
I'm not recommending you rush out and buy Suntory (or any) shares. This is not investment advice. Please do your own research.