Has NGK Insulators Run Too Far After Latest 24% Rally in 2025?

Thinking about what to do with NGK Insulators stock? You are not alone. With shares recently closing at 2,458.5 yen and a value score of 4 out of 6, the company is catching the attention of savvy investors weighing opportunities in today’s market. Over just the last week, NGK’s stock inched up 2.4%, and those who held on for the last month saw a 10.3% lift. Looking long term, the gains become even more impressive, with a 23.7% year-to-date rise, 38.6% over the past year, and an eye-catching 87.7% surge in the last five years.

So, what is driving NGK’s run? Market buzz lately has pointed to increased demand for advanced materials and energy infrastructure, areas where NGK is a key player. Shifts in industry sentiment have likely contributed to a renewed perception of upside, reducing the risk premium once assigned to these shares. That kind of positive momentum tends to attract both long-term optimists and traders seeking growth potential.

But as any seasoned investor knows, recent price gains do not always tell you if a stock is still a good value. This is where a closer look at NGK’s valuation really matters. Coming up, we will break down how the company stacks up on several time-tested valuation checks, and we will reveal an even more insightful approach to measuring value at the end of the article.

Why NGK Insulators is lagging behind its peers

Approach 1: NGK Insulators Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's worth by projecting its future cash flows and discounting those amounts back to today's value. For NGK Insulators, this approach uses a 2 Stage Free Cash Flow to Equity model. It takes into account recent cash generation and analysts’ forecasts, then relies on further projections for the coming decade.

Currently, NGK Insulators is generating Free Cash Flow (FCF) of ¥51.04 billion. Analysts expect FCF to remain robust over the next few years, with Simply Wall St extrapolating annual cash flows staying above ¥48 billion through 2035. By 2028, projected FCF is estimated at ¥51.75 billion. Even in ten years, the model anticipates ¥47.93 billion. All figures are in Japanese yen, NGK's reporting currency.

The DCF analysis calculates an intrinsic value of about ¥2,515 per share for NGK Insulators. Compared to the current share price of ¥2,458.5, this indicates the stock is trading at a modest 2.3% discount to fair value. This suggests it is slightly undervalued right now.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for NGK Insulators.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out NGK Insulators's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: NGK Insulators Price vs Earnings

The Price-to-Earnings (PE) ratio is a favored valuation measure for consistently profitable companies like NGK Insulators because it ties the stock price directly to how much the business actually earns. Investors use it to see whether the current share price makes sense given the profits being generated.

However, what counts as a fair PE ratio depends on several factors. Companies with faster expected earnings growth or lower risk usually justify higher PE ratios, while those facing uncertainties or slower growth may warrant lower ones. Industry context matters too, since some sectors typically command premium valuations.

Currently, NGK Insulators trades at a PE ratio of 11.6x, which sits below the Machinery industry average of 13.5x and well below the broader peer average of 22.4x. To get an even clearer picture, Simply Wall St’s “Fair Ratio” model estimates what would be a reasonable PE for NGK, taking into account not only its growth profile and financial strength, but also factors such as profit margins, industry trends, market cap, and specific risks. This approach yields a Fair Ratio of 14.7x, providing a tailored benchmark instead of relying only on broad peer or industry comparisons.

Since NGK Insulators’ current PE is just a touch lower than its Fair Ratio, the stock looks to be roughly aligned with its long-term fundamentals at today’s price.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your NGK Insulators Narrative

Earlier, we mentioned that there is an even better way to understand valuation. Let's introduce you to Narratives. A Narrative is your personal story or investment perspective on a company; it is where you combine your view of NGK Insulators’ future with your own assumptions about its fair value, potential revenue growth, profit margins, and more.

Narratives go beyond the numbers by linking your insights about a company’s story directly to a financial forecast and an estimated fair value. On Simply Wall St’s Community page, millions of investors use Narratives as an easy, accessible tool for shaping and sharing these viewpoints.

With Narratives, you can instantly update your investment thesis as news or results emerge, and directly compare your calculated Fair Value to the stock’s current price to help pinpoint whether it is a Buy, Hold, or Sell for you. For example, some investors think NGK Insulators could be worth far more if global green energy adoption accelerates. Others see less upside based on recent margin trends.

Do you think there's more to the story for NGK Insulators? Create your own Narrative to let the Community know!

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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