Critical Contrast: Itochu (OTCMKTS:ITOCY) and Dollarama (OTCMKTS:DLMAF)

Dollarama (OTCMKTS:DLMAF) and Itochu (OTCMKTS:ITOCY) are both large-cap consumer discretionary companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, risk, dividends, institutional ownership, earnings, valuation and analyst recommendations.

Profitability

This table compares Dollarama and Itochu’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Dollarama	17.65%	94.77%	17.12%
Itochu	N/A	N/A	N/A

Dividends

Dollarama pays an annual dividend of $0.33 per share and has a dividend yield of 0.2%. Itochu pays an annual dividend of $0.16 per share and has a dividend yield of 1.2%. Dollarama pays out 12.5% of its earnings in the form of a dividend. Itochu pays out 17.2% 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.

Analyst Ratings

This is a breakdown of current ratings for Dollarama and Itochu, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Dollarama	0	4	5	5	3.07
Itochu	0	1	1	2	3.25

Insider and Institutional Ownership

0.1% of Itochu shares are held by institutional investors. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Dollarama and Itochu”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Dollarama	$5.21 billion	6.89	$940.70 million	$2.64	50.46
Itochu	$98.47 billion	1.07	$5.63 billion	$0.93	14.31

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

Summary

Dollarama beats Itochu on 9 of the 14 factors compared between the two stocks.

About Dollarama

Dollarama Inc. operates a chain of dollar stores in Canada. Its stores offer general merchandise, consumables, and seasonal products. It also sells its products through online store. The company was formerly known as Dollarama Capital Corporation and changed its name to Dollarama Inc. in September 2009. Dollarama Inc. was founded in 1992 and is headquartered in Mount Royal, Canada.

About Itochu

ITOCHU Corporation engages in trading and importing/exporting various products worldwide. The company’s Textile segment produces and sells raw materials, threads, and textiles; and garments, home furnishings, and industrial materials, as well as trades in industrial textile and lifestyle products. Its Machinery segment engages in the plants, bridges, railways, and other infrastructure; power generation, transmission, transformation, and sale; water, environment and waste-related; ship trading; renewable and alternative energy; and waste recycling businesses. The company’s Metals & Minerals segment engages in development of metal and mineral resource; processing and steel products; trading of iron ore, coal, pig iron and ferrous raw materials, non-ferrous and light metals, steel products, nuclear fuels, and greenhouse gas emissions; and recycling and waste treatment activities. Its Energy & Chemicals segment trades in crude oil, petroleum products, LPG, LNG, natural gas, hydrogen, organic and inorganic chemicals, functional food, synthetic resins, packaging materials, household goods, fine chemicals, pharmaceuticals, and electronic materials, as well as engages in the solar and biomass power generation, electricity trading, and the energy storage cell businesses. The company’s Food segment produces, distributes, and retails food products. Its General Products & Realty segment produces and sells paper, pulp, natural rubber, tire, and wood products and materials; develops and operates real estate properties, such as housing, logistics facilities, and other projects; and offers logistics services. The company’s ICT & Financial Business segment offers IT, Internet related and venture capital, mobile telephone equipment, BPO, broadcasting and communications, entertainment and content, healthcare and preventive medicine outsourcing, and financial and insurance brokerage services. The company was founded in 1858 and is headquartered in Tokyo, Japan.