A Look at EXEDY (TSE:7278) Valuation After Upgraded Forecasts and Sustained Operational Gains

EXEDY (TSE:7278) is making headlines after the company raised its financial forecasts for the fiscal year ending March 2026. Management pointed to stronger than expected results and sustained operational efficiency as key drivers behind the update.

See our latest analysis for EXEDY.

EXEDY’s upbeat forecast comes after a quarter in which the company made strategic investments and kept shareholders engaged with ongoing initiatives, including a new startup fund and evolving dividend plans. The momentum is clear, as the stock delivered a 36% total shareholder return over the past year and showed strong performance across both short and long-term periods. This suggests investors remain optimistic about its growth prospects.

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With EXEDY’s shares climbing and forecasts raised, the big question for investors is whether the current price still offers room for upside or if the company’s strong future is already reflected in the market.

Price-to-Earnings of 14.9x: Is it justified?

EXEDY’s current price-to-earnings (P/E) ratio stands at 14.9x, just below the peer group average of 16.2x. This suggests the market may be offering EXEDY at somewhat of a discount compared to its direct competitors.

The P/E ratio measures how much investors are willing to pay today for one unit of the company’s earnings. For auto component companies like EXEDY, this multiple highlights both recent profitability improvements and market sentiment about future growth.

With its P/E below the peer average, EXEDY appears attractively valued on this metric. However, it is worth noting that compared to the broader Japanese auto components industry, EXEDY’s P/E is actually higher (industry average: 11.3x), suggesting the stock could be priced for more robust future growth or premium quality earnings. According to a fair value estimate, the market could eventually move toward a more moderate multiple.

Explore the SWS fair ratio for EXEDY

Result: Price-to-Earnings of 14.9x (UNDERVALUED)

However, slower revenue growth or a reversal in net income gains could challenge the upbeat outlook and cause investors to reassess EXEDY’s valuation.

Find out about the key risks to this EXEDY narrative.

Another View: What Does the SWS DCF Model Say?

While the earnings multiple presents EXEDY as undervalued, our DCF model offers a strikingly different perspective. According to the SWS DCF model, EXEDY’s current share price is actually 68% below its estimated fair value. This large gap suggests the market may be overlooking some longer-term potential or lingering risks. Can both views be correct, or is one missing a critical piece of the puzzle?

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 EXEDY 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 840 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 EXEDY Narrative

If you think the story goes differently or want to reach your own conclusions, you can dive into the data and craft your personal view in just a few minutes. Do it your way

A great starting point for your EXEDY research is our analysis highlighting 3 key rewards and 1 important warning sign 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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