Assessing Hokuhoku Financial Group (TSE:8377) Valuation Following Board-Approved Share Buyback Program

Hokuhoku Financial Group (TSE:8377) just announced a share repurchase program, with plans to buy back up to 1.02% of its outstanding shares by the end of December 2025. This move tends to catch the attention of investors, as it can sometimes signal management’s confidence in the business and provides a potential boost to shareholder value.

See our latest analysis for Hokuhoku Financial Group.

Momentum has been undeniable for Hokuhoku Financial Group, with a 21.05% share price return over the last month and a 124.92% year-to-date gain. When you factor in reinvested dividends, the total shareholder return climbs to an eye-popping 150.32% over the past year. This highlights not just strong performance but renewed investor optimism following recent announcements.

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But with such an impressive run already, the key question now is whether Hokuhoku Financial Group’s shares remain undervalued, or if the market has already priced in much of the future growth potential.

Price-to-Earnings of 10.5x: Is it justified?

Hokuhoku Financial Group trades at a price-to-earnings (P/E) ratio of 10.5x. This is below the Japanese market average of 13.6x but just slightly above the JP Banks industry average of 10.4x. This suggests the stock is valued more attractively than the market overall, yet not especially cheap for a bank.

The P/E ratio is a useful tool to compare how investors are pricing a company's current earnings relative to its peers. For a bank like Hokuhoku Financial Group, the P/E indicates what investors are willing to pay for each yen of reported profit. A lower P/E can point to undervaluation if earnings growth prospects are strong, while a higher ratio may signal either market optimism or a premium valuation.

In Hokuhoku’s case, not only is its P/E below that of the wider market, but it is also below an estimated fair P/E of 13.9x. This means the market could still move to price the company’s shares higher if its profit growth momentum is sustained, given the company’s strong recent earnings acceleration and above-average growth forecasts.

Result: Price-to-Earnings of 10.5x (UNDERVALUED)

Explore the SWS fair ratio for Hokuhoku Financial Group

However, risks remain, including a potential correction if growth momentum slows or if analyst price targets, which are currently below the share price, prove accurate.

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

Another View: Discounted Cash Flow Challenges the Case

While Hokuhoku Financial Group’s earnings multiple suggests the shares could be attractively priced, our DCF model presents a more cautious perspective. The SWS DCF model estimates fair value at ¥3,217.01, which is significantly below the current market price. This raises the question of whether momentum is getting ahead of fundamentals, or if there is something the market recognizes that the model does not.

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 Hokuhoku 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 908 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 Hokuhoku Financial Group Narrative

If you see the numbers differently or have your own take on the data, you’re always welcome to build a narrative yourself in just a few minutes. Do it your way

A great starting point for your Hokuhoku Financial Group 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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