Okumura (TSE:1833): Assessing Valuation After Upbeat Results and Upgraded Outlook

Okumura (TSE:1833) just reported improved results for the half-year, with higher net sales and a swing back to profit. Management also raised full-year forecasts and outlined a more favorable shareholder return policy.

See our latest analysis for Okumura.

Okumura’s upbeat half-year results and new outlook appear to have reignited enthusiasm. Its share price has surged nearly 14% over the past month and climbed 34% year-to-date. Even more impressive, the company has delivered a 42% one-year total shareholder return and a standout 180% over five years, signaling resilient momentum in both the short and long run.

If Okumura’s turnaround has you curious about what else is happening in Japan’s capital goods space, now’s a great time to discover fast growing stocks with high insider ownership

But with such strong share price gains and renewed optimism, is Okumura stock still undervalued? Or has the recent rally already priced in its improving prospects and future growth? Is there a real buying opportunity here?

Price-to-Earnings of 37.2x: Is it justified?

Okumura now trades at a price-to-earnings (P/E) ratio of 37.2x. This is significantly higher than both its industry peers and the wider market. With shares last closing at ¥5,360, this premium places the stock well above the sector average, which suggests bullish expectations for future growth or a possible overvaluation.

The P/E ratio measures how much investors are willing to pay per yen of earnings. It is a key yardstick for profitability and growth potential in the construction industry. A high multiple typically indicates either rapid earnings growth, a scarcity of quality alternatives, or overly optimistic market sentiment.

Okumura's current P/E ratio greatly exceeds the Japanese Construction industry average of 12.6x and the peer average of 12.8x. This notable gap suggests the market might be overestimating the company’s medium-term earnings rebound or is discounting past profit challenges. In the absence of a calculated fair ratio, investors should question whether such optimism will be realized or if expectations need adjustment over time.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Earnings of 37.2x (OVERVALUED)

However, sharp earnings volatility or an abrupt change in investor sentiment could quickly dampen Okumura’s strong momentum and high valuation.

Find out about the key risks to this Okumura narrative.

Another View: Discounted Cash Flow Perspective

While Okumura’s steep price-to-earnings ratio has sparked concerns about overvaluation, our DCF model arrives at a notably different conclusion. It estimates Okumura’s fair value at ¥3,319.57 per share, well below the current market price. This suggests the stock could still be overvalued. But does this mean the recent optimism is premature, or is the DCF too conservative given the turnaround?

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 Okumura 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 876 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 Okumura Narrative

If you want to dive deeper or chart your own path, you can analyze the numbers yourself and build a custom view of Okumura in just a few minutes. Do it your way

A great starting point for your Okumura research is our analysis highlighting 4 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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