Does the Rally in Sumitomo Mitsui Trust Signal Room for Further Growth in 2025?

Thinking about whether to buy, hold, or walk away from Sumitomo Mitsui Trust Group stock? You are not alone. With its share price quietly advancing 0.8% over the last week and rising 2.7% in the past month, plenty of investors are wondering what comes next. Take a step back and you will see that the bigger picture is even more impressive. The stock is up a hefty 14.7% since the start of the year and has more than doubled over the last three years, soaring an incredible 126.9%. Let us not forget the truly long-term holders, who have seen over 246% gains in five years.

So, what is fueling this consistent climb? Recent market trends have played to Sumitomo Mitsui Trust Group’s strengths, pushing financial stocks higher as investors hunt for stability and yield. There is definitely a sense that the market views this stock as less risky than before, and that optimism is showing up both in the short-term pops and the long-term surge. That said, run-ups like this inevitably get us thinking. Has the stock run too far ahead of itself, or is there still value left to be unlocked?

On paper, Sumitomo Mitsui Trust Group looks attractively valued. When we crunch the numbers using six different valuation checks, the company passes five of them, scoring an impressive 5 out of 6. That alone should make anyone pause for a closer look. In the next section, we will break down these valuation methods and see exactly where Sumitomo Mitsui Trust Group shines. If you are looking for the sharpest insight, make sure to stick around for the final part of our analysis.

Why Sumitomo Mitsui Trust Group is lagging behind its peers

Approach 1: Sumitomo Mitsui Trust Group Excess Returns Analysis

The Excess Returns model focuses on how effectively a company uses shareholder capital to generate profits above the cost of that capital. Specifically, it measures the difference between what the company earns on its equity and what it must pay out to its capital providers, showing whether there is real value creation for shareholders.

For Sumitomo Mitsui Trust Group, the numbers tell a compelling story. The company has a Book Value of ¥4,413.87 per share and is projected to generate a stable EPS of ¥464.08 per share, according to consensus from nine analyst Return on Equity forecasts. The estimated cost of equity is ¥311.17 per share, resulting in a healthy Excess Return of ¥152.91 per share. On average, the group has achieved a projected Return on Equity of 9.55%, with its Stable Book Value forecast to rise to ¥4,860.95 per share based on future estimates from seven analysts.

After crunching these figures, the model estimates that Sumitomo Mitsui Trust Group shares are intrinsically worth about ¥7,461 per share. When compared to the current market price, this figure suggests the stock is trading at a 42.8% discount to its fair value. This makes it look significantly undervalued by this measure.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Sumitomo Mitsui Trust Group.

Our Excess Returns analysis suggests Sumitomo Mitsui Trust Group is undervalued by 42.8%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Sumitomo Mitsui Trust Group Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies because it directly relates a company’s share price to its actual earnings. For investors, it is an intuitive way to gauge how much they are paying for each yen of profit. This makes the PE ratio a simple benchmark for comparing companies within the same sector.

Typically, a higher PE ratio suggests the market expects stronger future growth or views the company as lower risk. Conversely, a lower PE might indicate lower growth expectations or greater risk. However, it is important to remember that different businesses and industries tend to have different "normal" PE ratios depending on their growth profiles, profitability, and risk levels.

Currently, Sumitomo Mitsui Trust Group trades at a PE ratio of 10.65x. This is slightly below the industry average PE of 11.23x and well below the peer average of 19.96x. More importantly, Simply Wall St’s proprietary “Fair Ratio” for the stock comes in at 13.42x. The Fair Ratio considers factors unique to Sumitomo Mitsui Trust Group, such as its earnings growth, industry dynamics, solid profit margin and market cap, as well as its company-specific risks. Unlike simple peer or industry comparisons, this approach offers a more tailored benchmark for fair value.

Because Sumitomo Mitsui Trust Group’s current PE of 10.65x is significantly below its Fair Ratio of 13.42x, the stock appears undervalued on this basis.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Sumitomo Mitsui Trust Group Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. Narratives are a simple and powerful way for investors to attach a story and personal perspective to the numbers, linking their assumptions about a company’s future revenue, earnings, margins, and fair value into a single, understandable forecast. By connecting a company’s story to a financial model and then to a clear fair value, Narratives help you see the “why” behind the numbers you use to make your buy or sell decisions.

Best of all, Narratives are easy to use and accessible directly within the Community page of Simply Wall St, trusted by millions of investors worldwide. As new information appears, such as earnings announcements or major news, Narratives update dynamically so you always have the most relevant view. For instance, one investor’s Narrative about Sumitomo Mitsui Trust Group may project a fair value as high as ¥10,000 per share based on optimistic growth, while another sees only ¥6,100, reflecting caution about the outlook.

Narratives enable you to compare your chosen fair value to the current price at a glance, making your investment decisions clearer and more confident than ever before.

Do you think there's more to the story for Sumitomo Mitsui Trust Group? Create your own Narrative to let the Community know!

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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