How SMFG (TSE:8316) Valuation Stacks Up After Buyback, Dividend Hike, and Profit Forecast Upgrade

Sumitomo Mitsui Financial Group (TSE:8316) just revealed a share repurchase plan, raised both interim and year-end dividends, and lifted its profit forecast. These moves are sparking close attention from shareholders and market watchers alike.

See our latest analysis for Sumitomo Mitsui Financial Group.

Momentum is picking up for Sumitomo Mitsui Financial Group following the buyback, dividend increases, and upbeat profit guidance. The one-month share price return is 10.3% and the total shareholder return over the past year now stands at 25.7%. Over the longer run, the three- and five-year total shareholder returns of 212% and 425% underscore impressive wealth creation for patient investors.

If these strategic moves have you rethinking your portfolio, now’s a perfect moment to discover fast growing stocks with high insider ownership.

With shares near record highs after a wave of positive news, the critical question now is whether Sumitomo Mitsui Financial Group is still undervalued or if the market has already priced in its strong growth prospects.

Price-to-Earnings of 24.9x: Is it justified?

The market is pricing Sumitomo Mitsui Financial Group at a price-to-earnings (P/E) ratio of 24.9x, well above its peer and industry averages, despite the stock’s strong recent run to ¥4,449. This suggests investors are paying a premium relative to other banks in the sector.

The price-to-earnings ratio measures how much investors are willing to pay for each yen of earnings. It is a widely used tool for relative valuation in the banking sector. A higher P/E often reflects expectations of superior growth or stronger profitability, but it also raises the bar for performance.

Currently, Sumitomo Mitsui’s P/E ratio is significantly higher than its direct peers at 14.6x and the broader Japanese banking industry at 10.8x. The market is expecting more, whether in future growth, stability, or unique strategic advantages. However, compared to an estimated fair P/E ratio of 18.2x, the current premium looks steep. This sets up a level that could be tested if future results disappoint.

Explore the SWS fair ratio for Sumitomo Mitsui Financial Group

Result: Price-to-Earnings of 24.9x (OVERVALUED)

However, unexpected shifts in Japan’s banking regulations or slower revenue growth could quickly challenge the positive outlook around Sumitomo Mitsui Financial Group.

Find out about the key risks to this Sumitomo Mitsui Financial Group narrative.

Another View: Discounted Cash Flow Tells a Different Story

While the P/E ratio suggests Sumitomo Mitsui Financial Group may be expensive, our DCF model paints a contrasting picture. The current share price of ¥4,449 is 39.4% below the modeled fair value of ¥7,346. This implies the stock is significantly undervalued despite recent gains. Could the market be missing potential upside?

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 Sumitomo Mitsui Financial Group 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 927 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 Sumitomo Mitsui Financial Group Narrative

If you prefer forming your own opinion or want to analyze the numbers firsthand, it's easy to build a personalized view of the stock in just a few minutes, so why not Do it your way.

A great starting point for your Sumitomo Mitsui Financial Group 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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