Is Ebara Still Fairly Priced After Its Strong 60% Surge This Year?

If you have been keeping an eye on Ebara, you are probably wondering if this is the right time to jump in, hold steady, or take some profit off the table. After all, with strong gains of 6.8% over the past month and a remarkable 60.7% surge in the last year, this stock is already turning heads. Year-to-date, Ebara is up 19.5%, building on an impressive three-year return of 237.2% and an eye-popping 520.1% over the last five years. The momentum is certainly hard to ignore, and many investors are wondering whether the latest market developments signal further upside or a possible cooling-off period ahead.

But beyond those headline numbers, what really matters for long-term investors is whether Ebara remains a good value. According to a recent valuation screen, the company scores a 2 out of 6, meaning it appears undervalued on two key checks. Some might see this as a mixed signal, especially after such a robust run in the stock price, but it suggests there may still be pockets of opportunity if you know where to look.

In the next sections, we will break down how Ebara fares across a range of established valuation methods and explore how you can use these results to make a more informed decision. If you are looking for a truly fresh perspective on assessing value, be sure to stick around until the end, where we will introduce an approach that could give you an even sharper edge.

Ebara scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Ebara Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's value by projecting its future cash flows and then discounting them back to today's value. This approach aims to capture how much those expected cash flows are worth in today's terms based on time and risk.

For Ebara, the latest reported Free Cash Flow is ¥38.0 billion. Looking ahead, analysts expect Ebara’s Free Cash Flow to grow steadily, reaching an estimated ¥82.2 billion in ten years. The projections show generally rising cash flows, though the rate of growth gradually tapers off in later years as the company matures. Most future figures are based on extrapolations, since analyst estimates typically only extend five years out.

Based on these projections and after discounting future cash flows to present value, the DCF analysis yields an intrinsic value of ¥2,834 per share. Compared to the current share price, this implies the stock is 9.7% overvalued.

Result: ABOUT RIGHT

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

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Ebara'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: Ebara Price vs Earnings (PE Ratio)

The Price-to-Earnings (PE) ratio is one of the most widely used valuation tools for profitable companies, as it gives a quick sense of how much investors are willing to pay for each yen of current earnings. This makes it particularly effective for firms like Ebara that have a track record of stable profit growth.

Typically, a higher PE ratio can reflect optimism about a company’s growth prospects or a low risk profile. Conversely, a lower PE ratio might indicate worries about growth, profitability, or broader sector trends. What constitutes a “normal” or “fair” PE depends on how the business is expected to grow versus its risks and returns compared to peers.

Ebara currently trades at a PE ratio of 19.54x, which is closely aligned with the peer average of 19.57x and is materially above the broader Machinery industry average of 13.51x. However, a single comparison does not always tell the full story, since every company is unique in terms of growth, risk, margins, and size.

This is where Simply Wall St’s proprietary “Fair Ratio” comes in. It is a nuanced benchmark that incorporates not just sector comparisons but also Ebara’s own earnings growth, market capitalization, profit margins, and risk profile. This allows for a much more tailored assessment than basic peer or industry averages. In Ebara’s case, the Fair Ratio is 22.53x, which is very close to the current PE multiple.

Since Ebara’s current PE is just slightly below its Fair Ratio, the stock can be considered priced about right on this basis.

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 Ebara Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. Simply put, a Narrative is your personal investment story. It’s how you connect the numbers to your unique perspective on Ebara’s future, by outlining your own assumptions for things like fair value, future revenue, earnings, and profit margins.

Narratives work by linking a company’s story, your forecasts, and a dynamic fair value into one simple, shareable view. This makes it easy for anyone, regardless of investment experience, to create and refine their view using the Narratives tool on Simply Wall St’s Community page, where millions of investors are already participating.

Narratives help you decide when to act by showing you at a glance how your fair value compares to today’s price. They are constantly updated as soon as new information, like breaking news or earnings, becomes available, ensuring your view stays relevant.

For example, one Ebara investor might see upside potential and set a high fair value while another, more cautious, may project a scenario much lower than the current price. Both are valid stories driven by different expectations.

Do you think there's more to the story for Ebara? 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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