Hirogin Holdings (TSE:7337): Assessing Valuation After Launching Share Buyback Program

Hirogin Holdings (TSE:7337) has kicked off its share buyback program, purchasing over 720,000 shares on the Tokyo Stock Exchange following board approval. The move is intended to optimize the capital structure and increase shareholder returns.

See our latest analysis for Hirogin Holdings.

Momentum has been strong for Hirogin Holdings this year, with a 25.5% year-to-date share price return and an impressive 26.7% total shareholder return over the past twelve months. The recent buyback announcement appears to have reinforced investor confidence. This builds on solid long-term gains and suggests that positive sentiment around growth and capital returns could persist if management continues to deliver.

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But with shares now trading close to analyst price targets, investors may wonder whether Hirogin Holdings is still undervalued after recent gains or if markets are already factoring in the company’s future growth prospects, leaving little room for upside.

Price-to-Earnings of 11.9x: Is it justified?

Hirogin Holdings currently trades at a price-to-earnings (P/E) ratio of 11.9x, just above the industry and peer averages and slightly below the broader Japanese market. This suggests the stock is valued on the higher side relative to its closest competitors, but not excessively so.

The P/E ratio represents how much investors are paying for each yen of earnings. For banks, this is a crucial metric because it reflects expectations around future profitability and risk in a sector where growth is typically steady rather than explosive. In Hirogin Holdings’ case, the higher-than-average multiple may indicate that the market expects its recent earnings momentum to continue, but it could also suggest limited upside from current levels if future profit growth does not exceed expectations.

Notably, Hirogin Holdings' P/E ratio of 11.9x stands above the JP Banks industry average of 11.6x and the peer group average of 11.8x. This points to a premium that may be difficult to justify unless management can deliver sustained profit expansion. However, this multiple is still below the broader Japanese market P/E of 14.3x, offering some relative value. When compared to the estimated Fair Price-to-Earnings Ratio of 13.6x, the stock appears undervalued on a normalized basis. This could imply room for the valuation to move higher if the company's growth trajectory remains consistent.

Explore the SWS fair ratio for Hirogin Holdings

Result: Price-to-Earnings of 11.9x (ABOUT RIGHT)

However, stronger regulatory headwinds or a slowdown in net income growth could quickly challenge optimistic expectations and put pressure on Hirogin Holdings' premium valuation.

Find out about the key risks to this Hirogin Holdings narrative.

Another View: What Does the SWS DCF Model Suggest?

Taking a different approach, our SWS DCF model indicates Hirogin Holdings may be overvalued. Shares are trading at ¥1,461.5 compared to an estimated fair value of ¥1,177.46. This perspective challenges the earnings-based optimism and raises concerns about how much future growth is already priced in. Which approach should investors trust?

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 Hirogin Holdings 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 860 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 Hirogin Holdings Narrative

If you have your own insights or wish to dig deeper into the numbers, you can put your story together in just minutes. Do it your way

A great starting point for your Hirogin Holdings research is our analysis highlighting 3 key rewards and 2 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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