If you have been watching 77 Bank (TSE:8341) lately, you are not alone. The stock has made a move that is starting to turn investor heads, and while there has not been a headline-grabbing event driving the action, recent trading might have prompted you to wonder whether something is shifting beneath the surface. Sometimes a stock draws attention simply by its momentum, and with nothing concrete in the news, it might be the valuation or market sentiment that is doing the heavy lifting.
Looking at the bigger picture, 77 Bank’s performance has quietly gathered steam. The stock is up around 56% over the past year, including a run of more than 20% in the past 3 months and an impressive 29% gain year-to-date. Against a multi-year view, its returns look even more dramatic, suggesting that positive momentum has been building rather than fading, even if the story has played out mostly off the radar. While the net income growth recorded this year is a solid 8%, no single event appears to fully explain the scale of the advance, at least on the surface.
So the key question is, after such an extended rally, is 77 Bank trading at a discount or has the market already started pricing in the next phase of its growth?
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Price-to-Earnings of 10.8x: Is it justified?
Based on its price-to-earnings ratio, 77 Bank currently appears undervalued relative to peers and the broader Japanese banking sector.
The price-to-earnings (P/E) ratio, which compares a company’s share price to its per-share earnings, is a widely used tool for assessing whether a stock is fairly valued. In banking, a lower P/E can suggest undervaluation if profitability and earnings quality are strong.
77 Bank’s P/E of 10.8x is notably below both the JP Banks industry average and the peer group average. This discount, along with evidence of consistent profit growth, suggests that the market may be underestimating its future earnings potential given its recent performance and margins.
Looking at things from another angle, the SWS DCF model also suggests 77 Bank is undervalued. Both traditional and cash flow-based methods agree for now. The question remains: will real-world performance follow these signals?
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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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