Suruga Bank (TSE:8358): Assessing Valuation After Completion of Share Buyback Program

Suruga Bank (TSE:8358) has wrapped up its planned share buyback, purchasing just over 8 million shares, or about 4% of its outstanding stock, between July and September. This marks the completion of a previously announced repurchase program and could shape how investors view the company’s future capital allocation choices.

See our latest analysis for Suruga Bank.

Suruga Bank’s latest buyback wrapped up against a backdrop of robust momentum, with its year-to-date share price return climbing by nearly 31% and one-year total shareholder return topping 38%. This wave of positive sentiment shows real staying power, supported by a remarkable 325% total shareholder return over three years. This suggests many investors see future growth far beyond this recent buyback.

If Suruga’s run has sparked your curiosity about where else opportunity might be building, now’s the ideal moment to broaden your search and discover fast growing stocks with high insider ownership

But with Suruga Bank’s shares up strongly and recent buybacks completed, investors are left wondering if there is real value left on the table or if the current share price already reflects future growth potential.

Price-to-Earnings of 13.8x: Is it justified?

At a price-to-earnings (P/E) ratio of 13.8x, Suruga Bank stands out as significantly more expensive than its Japanese banking peers, the industry average, and the estimated fair value. The last close at ¥1,492 highlights this premium, raising questions about whether such a valuation is warranted.

The price-to-earnings ratio reflects how much investors are paying for each yen of Suruga Bank’s earnings. It measures investor confidence in future profit growth, with higher numbers indicating higher expectations. For banks in mature markets, this figure can signal the market’s views on profit sustainability, lending quality, and management’s ability to deliver returns.

Suruga Bank’s P/E of 13.8x is higher than the peer average of 12.9x and is also above the wider JP Banks industry average of 10.7x. Even compared to the estimated fair price-to-earnings ratio of 13x, Suruga appears somewhat expensive. If markets move toward the fair ratio, there could be a tightening in valuation in the future.

Explore the SWS fair ratio for Suruga Bank

Result: Price-to-Earnings of 13.8x (OVERVALUED)

However, declining annual revenue and recent share price volatility could challenge Suruga Bank’s strong momentum as it moves forward.

Find out about the key risks to this Suruga Bank narrative.

Another View: SWS DCF Model Suggests Undervaluation

While the current market price appears high compared to profit multiples, the SWS DCF model offers a different perspective. According to our DCF model, Suruga Bank trades about 4.9% below its calculated fair value. This suggests possible upside even with premium earnings ratios. Does this DCF result reveal a hidden opportunity, or is it overlooking real risks in the numbers?

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 Suruga Bank 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 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 Suruga Bank Narrative

If you want to challenge the existing analysis or prefer to dive into the numbers yourself, you can develop your own viewpoint in under three minutes, and even Do it your way.

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