Yaskawa: World Leader in Robotics

07/07/2015 10:00 am EST

Focus: STOCKS

Robotics is one of the world’s great emerging technologies and Asia dominates the budding industry by far, producing 62% of global industrial robots, says Martin Hutchinson, editor of Pacific Wealth.

Japan’s Yaskawa Electric (YASKY)—the world leader in industrial robotics—is central to one of the 21st century’s key emerging technologies and to the world’s manufacturing growth.

Today, Yaskawa robots can be found on the factory floor, welding and painting, or in electronics manufacturing, where they handle semiconductor chips.

Yaskawa intends to push further into the field of medical robotics, applying the principles of mechatronics to the medical segments. Even drug companies rely on robots because they’re faster and more precise than seasoned lab techs.

And hospitals and nursing homes already use robots, especially in Japan, where there’s a labor shortage. Yaskawa says next year it will introduce a robot that will move a bedridden person to a wheelchair.

Eventually, household robots—those that can clean the carpets and the pool, and even mow the lawn and watch the dog—will become more common.

But it’s still industrial robots that drive the market. The typical industrial robot sells for $100,000 to $200,000 including software.

The estimated total market for industrial robots and associated equipment was at $25 billion in 2011; the Japanese government believes it will reach $70 billion by 2025.

For the year to March 2016, Yaskawa projects sales to increase 9% and operating income 16%, although net income, which rose 46% in the year to March 2015, is expected to be flat.

The company plans to expand its robot centers worldwide from 31 to 38, launch a third robot factory in September of this year, and develop a new robot product line for 2016.

Yaskawa trades at 17 times earnings; the stock should be purchased in taxable accounts to take advantage of the tax treaty between the United States and Japan that affects dividends.

At this reasonable valuation, the stock represents an excellent stake in our undoubtedly robotic future.

Yaskawa Electric was founded in 1915 and its principal business for many years was motion-control systems, a subsector of automation. Now, robotics provide about a third of the company’s sales and operating income.

Yaskawa’s leadership in robotics alone makes it an enticing investment, but the company also has ambitious and achievable goals, other automation businesses, and a reasonable valuation. Buy up to $40.

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