Hazama Ando (TSE:1719): Valuation After Strong Earnings Growth and Dividend Hike

Hazama Ando (TSE:1719) just announced a sizeable jump in consolidated net sales and operating profit for the first half of the fiscal year. The company also revealed plans to raise its annual dividend, underscoring its focus on shareholder value.

See our latest analysis for Hazama Ando.

Hazama Ando’s strong first-half results have kept investors optimistic, with the latest share price up 46% year-to-date. A stellar 1-year total shareholder return of nearly 58%, along with a significant 200% return over five years, highlight sustained momentum and growing confidence in the company’s outlook.

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But with the stock trading near recent highs and analysts’ targets, the question now is whether Hazama Ando still offers an attractive entry point or if the market has already factored in its future growth prospects.

Price-to-Earnings of 9.9x: Is it justified?

Hazama Ando’s shares are trading at a price-to-earnings ratio of 9.9x, which is notably lower than both the peer average (19x) and the broader JP Construction industry average (12.1x). At the latest close of ¥1,738.5, this places the company firmly toward the undervalued end of the spectrum when compared to major benchmarks.

The price-to-earnings (P/E) ratio measures how much investors are willing to pay today for a yen of earnings, making it a key metric for assessing value, especially in established sectors like construction. A lower P/E could indicate that the market expects slower future growth, or it could signal a potential bargain when earnings quality is high.

For Hazama Ando, the low P/E contrasts with evidence of strong, high-quality past earnings and profit growth that recently exceeded both its five-year average and industry norms. With the market pricing Hazama Ando well below what its industry and peers command, there could be room for rerating, particularly as its fair P/E ratio is estimated at 10.8x. This is a level markets could shift toward as fundamentals develop.

Explore the SWS fair ratio for Hazama Ando

Result: Price-to-Earnings of 9.9x (UNDERVALUED)

However, slower annual net income growth and shares trading just above analyst targets could limit near-term upside if fundamentals do not improve further.

Find out about the key risks to this Hazama Ando narrative.

Another View: Discounted Cash Flow Perspective

Looking at Hazama Ando through the lens of our DCF model, the picture shifts. The SWS DCF model estimates fair value at ¥2,407.56, indicating shares may be undervalued by almost 28% compared to current price levels. Does this suggest more upside than the market currently expects?

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 Hazama Ando 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 882 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 Hazama Ando Narrative

If you have your own take on Hazama Ando’s outlook or want to dive deeper into the numbers, you can quickly craft your personal analysis in just a few minutes. This lets you shape the story your way. Do it your way

A great starting point for your Hazama Ando 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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