3 Japanese Exchange Stocks Trading Up To 30.1% Below Intrinsic Value

September 01, 2024

Japan's stock markets have shown resilience, with the Nikkei 225 Index gaining 0.7% and the broader TOPIX Index up 1.0%, recovering most of the ground lost earlier in the month. This recovery comes amid a volatile economic environment influenced by interest rate changes and currency fluctuations. In such conditions, identifying undervalued stocks that are trading below their intrinsic value can offer significant investment opportunities. Here are three Japanese exchange stocks currently trading up to 30.1% below their intrinsic value, presenting potential for long-term growth amidst market uncertainties.

Top 10 Undervalued Stocks Based On Cash Flows In Japan

Name	Current Price	Fair Value (Est)	Discount (Est)
Densan System Holdings (TSE:4072)	¥2729.00	¥5362.58	49.1%
Kotobuki Spirits (TSE:2222)	¥1761.00	¥3434.73	48.7%
Hottolink (TSE:3680)	¥338.00	¥661.95	48.9%
SaizeriyaLtd (TSE:7581)	¥5090.00	¥10174.80	50%
Kadokawa (TSE:9468)	¥2907.50	¥5613.02	48.2%
EnomotoLtd (TSE:6928)	¥1473.00	¥2940.22	49.9%
Visional (TSE:4194)	¥8920.00	¥17138.61	48%
Fudo Tetra (TSE:1813)	¥2447.00	¥4670.27	47.6%
TORIDOLL Holdings (TSE:3397)	¥3696.00	¥7378.82	49.9%
SBI ARUHI (TSE:7198)	¥861.00	¥1705.31	49.5%

Click here to see the full list of 80 stocks from our Undervalued Japanese Stocks Based On Cash Flows screener.

Let's review some notable picks from our screened stocks.

Daiichi Sankyo Company (TSE:4568)

Overview: Daiichi Sankyo Company, Limited manufactures and sells pharmaceutical products in Japan, North America, Europe, and internationally with a market cap of ¥11.64 trillion.

Operations: The company's revenue from its pharmaceutical operations is ¥1.69 trillion.

Estimated Discount To Fair Value: 30.1%

Daiichi Sankyo is trading at ¥6108, significantly below its estimated fair value of ¥8740.92. Despite recent legal challenges and mixed product news, the company shows strong potential with forecasted earnings growth of 20.4% per year, outpacing the Japanese market's 8.6%. Revenue is expected to grow at 13.2% annually, faster than the market average of 4.3%. This positions Daiichi Sankyo as an undervalued stock based on cash flows in Japan.

TSE:4568 Discounted Cash Flow as at Sep 2024

Trend Micro (TSE:4704)

Overview: Trend Micro Incorporated develops and sells security-related software for computers and related services in Japan and internationally, with a market cap of ¥1.14 trillion.

Operations: Revenue segments for Trend Micro are: Japan ¥84.17 billion, Europe ¥63.59 billion, Americas ¥70.46 billion, and Asia Pacific ¥126.28 billion.

Estimated Discount To Fair Value: 28.8%

Trend Micro, trading at ¥8731, is significantly undervalued with an estimated fair value of ¥12255.6. Despite a recent dip in profit margins from 11.2% to 6.4%, the company's earnings are projected to grow by 21.98% annually over the next three years, outpacing market expectations. Recent M&A rumors and strategic partnerships, such as with GMI Cloud and joining COSAI, underscore its focus on AI-driven cybersecurity innovations and potential for future revenue growth at 6.2% per year.

TSE:4704 Discounted Cash Flow as at Sep 2024

Union Tool (TSE:6278)

Overview: Union Tool Co. engages in the production and sale of cutting tools, linear motion products, and metal machining equipment in Japan and internationally, with a market cap of ¥101.75 billion.

Operations: Revenue segments include ¥19.84 billion from Japan, ¥15.05 billion from Asia, ¥2.17 billion from Europe, and ¥1.84 billion from North America.

Estimated Discount To Fair Value: 25.6%

Union Tool, trading at ¥5890, is significantly undervalued with an estimated fair value of ¥7912.51. The company’s earnings are forecast to grow 21.45% annually over the next three years, surpassing the JP market's growth rate of 8.6%. Despite recent share price volatility, Union Tool expects net sales of ¥30 billion and operating profit of ¥6.4 billion for FY2024, reflecting robust cash flow potential and a solid dividend increase to ¥45 per share for Q2 2024.

TSE:6278 Discounted Cash Flow as at Sep 2024

Make It Happen

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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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