Skeptical of the Bull Case on KMTUY
ARK has been a major investor in Komatsu. I'm not convinced of the company's prospects...
Recently, ARK funds have been a major investor in Komatsu Ltd (KMTUY), a ~$30 billion market capitalization Japanese manufacturing conglomerate.
Komatsu currently trades at a paltry 0.4% dividend yield and is involved in the manufacturing of construction, mining, forestry, and military equipment.
A close look at the company’s financials over the past quarters does not inspire huge confidence in the value proposition of investing in KMTUY today.:
Decelerating revenue: the company’s topline revenue has stagnated over the past years, without significant growth prospects on the horizon
Declining gross profit margin: In 2018, the company was doing north of 30% gross margins, but this has deteriorated significantly in recent quarters - not good for profitability prospects
EBIT margin weakness: Komatsu’s EBIT margin has collapsed, nearly halving from where it was ten quarters ago in 2018
Return on equity and return on invested capital have also collapsed since 2018, as a result of the deterioration in operating performance. Meanwhile, the stock price is near where it was in 2018. What does Cathie Wood see that I missed?