DMG Mori (TSE:6141) Valuation Spotlight Following Share Buyback and Latest Quarterly Results

DMG Mori (TSE:6141) just announced a new share repurchase program alongside its latest quarterly results. The buyback, covering 1.8% of its share capital, reflects a focus on shareholder returns and capital flexibility.

See our latest analysis for DMG Mori.

DMG Mori’s announcement comes after a strong run in 2024, with a 22.9% year-to-date share price return signaling confidence among investors and momentum building around recent events such as the buyback and Q3 results. While short-term moves have been mixed, its three- and five-year total shareholder returns of 95.6% and 139.1% respectively highlight the company’s impressive long-term performance and growing appeal in the capital goods sector.

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But with DMG Mori still trading at a discount to analyst price targets and showing a notable gap to its estimated intrinsic value, the key question is whether there is real upside left here or if the market is already factoring in all future growth.

Price-to-Earnings of 44.3x: Is it justified?

DMG Mori's shares trade at a price-to-earnings (P/E) ratio of 44.3x, well above both its industry and peer averages, despite the company's current share price momentum. This level is typically a signal the market is pricing in robust future growth or exceptional profitability, but investors should note how this compares within the machinery sector.

The price-to-earnings ratio measures how much investors are willing to pay for each yen of earnings. For a capital goods company like DMG Mori, the P/E is an especially relevant gauge of expectations for ongoing earnings growth and sector positioning, as well as perceptions of risk and quality.

At 44.3x, DMG Mori is priced substantially higher than the Japanese machinery industry average of 13.4x and also exceeds its peer group’s 38.8x. Additionally, its P/E is above the estimated fair price-to-earnings ratio of 41.9x. This is a level the broader market may move toward if future results do not outperform expectations.

Explore the SWS fair ratio for DMG Mori

Result: Price-to-Earnings of 44.3x (OVERVALUED)

However, sustained high valuation and any slowdown in revenue or net income growth could make it more difficult for the share price to increase further.

Find out about the key risks to this DMG Mori narrative.

Another View: SWS DCF Model Points to Undervaluation

While the market’s price-to-earnings metric signals that DMG Mori shares may be expensive, our SWS DCF model suggests a different story. The shares are trading 17% below their estimated fair value of ¥3,686. This indicates potential room for upside. Could the market be overlooking underlying value?

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 DMG Mori 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 854 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 DMG Mori Narrative

If you have your own perspective or want to investigate the numbers firsthand, it only takes a few minutes to build your own view on DMG Mori. Do it your way

A great starting point for your DMG Mori research is our analysis highlighting 2 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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