Is Yamaguchi Financial Group (TSE:8418) Still Undervalued After Announcing a Major Share Buyback?

Yamaguchi Financial Group (TSE:8418) just rolled out a share repurchase program, planning to buy back up to 10,000,000 shares, which equals about 5% of its share capital. The move reflects management’s commitment to improving shareholder returns through better capital efficiency.

See our latest analysis for Yamaguchi Financial Group.

The buyback news comes shortly after a period of steady momentum. Yamaguchi Financial Group’s share price jumped 13% this past week and is up 23% year-to-date. The one-year total shareholder return stands at an impressive 33%. With additional board moves and branch reorganizations underway, the stock’s rally reflects renewed optimism about growth and capital returns.

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With the stock’s sharp gains and a new buyback on the table, is Yamaguchi Financial Group still trading at a discount, or have investors already priced in the company’s future growth potential?

Price-to-Earnings of 10.6x: Is it justified?

Yamaguchi Financial Group’s price-to-earnings ratio of 10.6x sits notably below the Japanese market average of 14.1x. This suggests the stock might be trading at a relative discount compared to its peers.

The price-to-earnings (P/E) ratio tells investors how much they are paying for each unit of a company’s earnings. In Japan’s banking sector, where stable but modest profit growth is typical, a lower P/E can either signal undervaluation or highlight market skepticism about future performance.

At 10.6x, Yamaguchi Financial Group’s P/E is not only lower than the national market but also below the Banks industry average of 11.3x. This means the market is pricing the company’s earnings at a cheaper rate than its industry peers. In addition, our estimates show the fair P/E ratio should be about 12.4x. This hints there is room for the share price to adjust upward if market perceptions improve.

Explore the SWS fair ratio for Yamaguchi Financial Group

Result: Price-to-Earnings of 10.6x (UNDERVALUED)

However, slower net income growth and a share price already near its analyst target could limit further upside for Yamaguchi Financial Group in the near term.

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

Another View: SWS DCF Model Suggests Limited Upside

While valuation based on earnings shows Yamaguchi Financial Group as undervalued, our SWS DCF model offers a different perspective. The DCF model values shares at ¥1,782.45, which is below the current trading price of ¥2,038. This suggests the stock may actually be slightly overvalued based on projected future cash flows. Is the market looking through short-term momentum, or are future growth assumptions too cautious?

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 Yamaguchi 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 920 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 Yamaguchi Financial Group Narrative

If you want to dig deeper or have a different take, you can put together your own analysis in just a few minutes. Do it your way

A great starting point for your Yamaguchi Financial Group research is our analysis highlighting 5 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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