Yamaguchi Financial Group (TSE:8418): Revisiting Valuation After Upgraded Earnings Forecast and Profitability Boost

Yamaguchi Financial Group (TSE:8418) raised its earnings forecast for the six months ended September 2025, attributing the upward revision to reduced expenses and an unexpected gain from selling a subsidiary earlier than initially planned.

See our latest analysis for Yamaguchi Financial Group.

Yamaguchi Financial Group’s decision to raise its earnings outlook comes after a solid run, with a 6.2% year-to-date share price increase and a standout total shareholder return of 14.5% over the past year. Momentum continues to build, as the stock has delivered impressive three- and five-year total shareholder returns of 146% and 202% respectively. This reflects enduring confidence amidst management’s ongoing focus on profitability and portfolio improvements.

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The earnings upgrade and recent share price gains invite a fresh look. However, is Yamaguchi Financial Group still undervalued based on future growth, or is the market already anticipating the company’s ongoing profitability improvements?

Price-to-Earnings of 9.1x: Is it justified?

Yamaguchi Financial Group’s price-to-earnings ratio stands at 9.1x, lower than both peers and the broader JP Banks industry, with shares changing hands at ¥1,753.

The price-to-earnings ratio, or P/E, measures how much investors are willing to pay for a company’s earnings. For a bank like Yamaguchi Financial Group, this is a primary tool for evaluating whether the market anticipates future profit growth or is pricing in uncertainty.

Yamaguchi’s P/E sits below the industry average of 10.3x and peers’ average of 10.7x. This signals the market may be cautious despite the company’s acceleration in earnings. The current P/E also trails the estimated fair value multiple of 12.2x. This is a level the market could move toward if the company’s profit trajectory continues on its current path.

Explore the SWS fair ratio for Yamaguchi Financial Group

Result: Price-to-Earnings of 9.1x (UNDERVALUED)

However, risks remain, including slower net income growth compared to revenue and the possibility that market sentiment could shift if profit momentum falters.

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

Another View: What Does the SWS DCF Model Say?

Taking a different approach, our DCF model suggests that Yamaguchi Financial Group is trading slightly below its estimated fair value. At the current price of ¥1,753, the model calculates a fair value closer to ¥1,780. This supports the undervaluation signal seen using other tools, but the margin is narrower. Which view tells the true story for future returns?

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 898 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 see these figures differently or like to analyze companies in your own way, it’s quick and easy to shape your own view. 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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