Bridgestone - where`s the bounce?

It does not do calendars like its rival Pirelli. Nor does it produce restaurant guides (Michelin). It does not even supply tyres to Formula 1 any more. Bridgestone is focused on its day job, which is being the world's biggest tyremaker by sales.

Yet that is not obvious from its share price. Why so little bounce in the Japanese company's shares?

Michelin, Pirelli and Taiwan's Maxxis (Cheng Shin Rubber) - Bridgestone's main rivals - have seen their shares gain at least a fifth over the past year; Bridgestone's have been flat. (Only Goodyear has done worse.)

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It is not an issue of high expectations: relative to this year's earnings, they trade on a multiple of 8, the same level as the European groups and far below Maxxis, on 14. The gap between analysts' target price, compiled by Bloomberg, and Bridgestone's trading price is near a five-year high, too.

The answer lies in its financial performance. Bridgestone's latest results on Wednesday show that its 9 per cent operating margin for the first three quarters of this year is half as good again as last year but still a third below its rivals. The same goes for its performance metrics. Its returns on assets (5 per cent versus 7 per cent) and on equity (10 per cent compared with about 20 per cent) are also poor.

Bridgestone's strategy plan, unveiled last month, would see it become the world's undisputed number one in its sector "in both name and reality". Goals include ROA of at least 6 per cent and pushing operating margins above 10 per cent. All very well, but that still leaves it behind its rivals.

More impressive is its plan for Y250bn (USD 3 billion) of capital spending a year, or about a 10th of sales. That suggests the company is confident that it can keep its market lead while improving cost efficiency. That optimism will have to bear fruit to pump up Bridgestone's shares.