Nintendo (OTCMKTS:NTDOY) vs. Japan Tobacco (OTCMKTS:JAPAF) Critical Review

Japan Tobacco (OTCMKTS:JAPAF) and Nintendo (OTCMKTS:NTDOY) are both consumer discretionary companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, valuation, risk, profitability, dividends, earnings and analyst recommendations.

Dividends

Japan Tobacco pays an annual dividend of $79.70 per share and has a dividend yield of 184.0%. Nintendo pays an annual dividend of $0.32 per share and has a dividend yield of 2.5%. Japan Tobacco pays out 35.3% of its earnings in the form of a dividend. Nintendo pays out 53.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Japan Tobacco is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Japan Tobacco and Nintendo, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Japan Tobacco	0	0	1	0	3.00
Nintendo	1	4	2	1	2.38

Institutional & Insider Ownership

24.7% of Japan Tobacco shares are owned by institutional investors. Comparatively, 0.0% of Nintendo shares are owned by institutional investors. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Japan Tobacco and Nintendo”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Japan Tobacco	N/A	N/A	N/A	$225.55	0.19
Nintendo	$15.37 billion	4.26	$2.80 billion	$0.60	21.20

Nintendo has higher revenue and earnings than Japan Tobacco. Japan Tobacco is trading at a lower price-to-earnings ratio than Nintendo, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Japan Tobacco and Nintendo’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Japan Tobacco	N/A	N/A	N/A
Nintendo	21.00%	16.11%	12.47%

Summary

Nintendo beats Japan Tobacco on 7 of the 12 factors compared between the two stocks.

About Japan Tobacco

Japan Tobacco Inc., a tobacco company, manufactures and sells tobacco products, pharmaceuticals, and processed foods in Japan and internationally. The company operates through three segments: Tobacco Business, Pharmaceutical Business, and Processed Food Business. It offers tobacco products, such as cigarettes, heat-not-burn tobacco products, E-vapor products, fine cut tobacco products, cigars, pipes, smokeless tobacco products, and hookah and kretek products. The company provides reduced-risk products, including infused tobacco capsules and heated tobacco sticks. In addition, it researches and develops, manufactures, and sells prescription drugs for the therapeutic areas, such as cardiovascular, kidney and metabolism, immunity/inflammation, and central nervous system. Further, the company provides frozen and room-temperature products, such as frozen udon noodles, packed rice, and frozen okonomiyaki; bakery products; and seasonings, including yeast extracts, assembled, kelp and bonito extracts, and oyster sauces. It offers its products under the Winston, Camel, MEVIUS, and LD brands. Japan Tobacco Inc. was incorporated in 1985 and is headquartered in Tokyo, Japan.

About Nintendo

Nintendo Co., Ltd., together with its subsidiaries, develops, manufactures, and sells home entertainment products in Japan, the Americas, Europe, and internationally. It also offers video game platforms, playing cards, Karuta, and other products; and handheld and home console hardware systems and related software. The company was formerly known as Nintendo Playing Card Co., Ltd. and changed its name to Nintendo Co., Ltd. in 1963. Nintendo Co., Ltd. was founded in 1889 and is headquartered in Kyoto, Japan.