Mazda (TSE:7261): Evaluating Valuation After Earnings Outlook and Upgraded Dividend Forecast

Mazda Motor (TSE:7261) just released its consolidated earnings outlook for the fiscal year ending March 2026 and announced an increase in its year-end dividend forecast to JPY 30 per share. Both moves suggest management feels confident about performance and shareholder value.

See our latest analysis for Mazda Motor.

Mazda Motor’s new dividend forecast and earnings outlook come as its shares have seen some ups and downs lately, with a recent dip in share price but strong overall momentum. Its 1-year total shareholder return stands at 9.8%, and the 5-year figure is an impressive 85.9%. This steady long-term performance, despite short-term volatility, reflects investors’ evolving views on Mazda’s growth path and commitment to rewarding shareholders.

If today’s moves have you thinking about the wider auto sector, it’s a great moment to see what’s happening across the industry with our curated auto manufacturers screener: See the full list for free.

With Mazda Motor’s recent guidance and dividend uplift, investors might be wondering whether the stock is trading at a bargain given its fundamentals, or if the market has already accounted for what lies ahead.

Price-to-Earnings of 19.8x: Is it justified?

At its last close of ¥1,049, Mazda Motor is trading on a price-to-earnings (P/E) ratio of 19.8x. This figure sits notably above both the industry and peer averages, suggesting investors may be pricing in stronger profitability or future growth.

The P/E ratio represents how much investors are willing to pay today for a yen of expected earnings. For Mazda, a P/E of 19.8x means buyers are valuing the company’s current profits at a premium compared to similar automakers, perhaps anticipating a recovery or sustained improvement in earnings potential.

Compared to the Asian auto industry average of 18.3x and a peer group average of 12.6x, Mazda’s multiple is high. However, based on regression analysis of fair value, the estimated "fair" P/E ratio for Mazda is 27.9x, which is considerably ahead of where the market is now. This gives room for sentiment to turn more positive if Mazda hits or beats its guidance.

Explore the SWS fair ratio for Mazda Motor

Result: Price-to-Earnings of 19.8x (OVERVALUED)

However, softer revenue growth or unexpected headwinds in the broader auto sector could challenge Mazda’s upbeat earnings outlook and impact future valuations.

Find out about the key risks to this Mazda Motor narrative.

Another View: What Does Our DCF Model Suggest?

While Mazda Motor's price-to-earnings ratio looks expensive compared to peers, our SWS DCF model tells a different story. By estimating future cash flows, the DCF approach points to a fair value of ¥1,172 per share, about 10.5% above the current price. Could this suggest a hidden opportunity that multiples might overlook?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Mazda Motor for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 901 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Mazda Motor Narrative

If you have your own perspective or want to take a closer look at the numbers, you can build your version of the story in just a few minutes. Do it your way

A great starting point for your Mazda Motor research is our analysis highlighting 2 key rewards and 4 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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