NTN (TSE:6472): Evaluating Valuation After Recent Momentum in the Capital Goods Sector

If you have been watching NTN (TSE:6472) lately, you are not alone. The stock’s movements have started to draw the attention of investors looking to make sense of whether there is an inflection point brewing, or if the recent activity is simply part of a wider trend playing out in the capital goods sector. With no single headline-grabbing event driving this week’s movement, some are wondering if the underlying story is about momentum building or just a pause before the next move. For those weighing their next steps, picking through the noise to see if value or risk is emerging has become the big question.

When you take a step back, NTN’s share price has shown meaningful growth over the past year, climbing 44%. That upward trajectory is even more impressive when you notice the stock is up over 10% in the past month and 63% over the past 3 months. These are signs that sentiment could be shifting rapidly. While the company’s annual revenue growth remains steady, with profits swinging back in a strong way, the market’s confidence in future growth appears to be increasing, despite a dip in shorter-term performance over this past week.

Now, the crucial question for investors is whether NTN is trading at a bargain considering these gains, or if the market already reflects expectations for the next chapters of its recovery story.

Price-to-Sales of 0.2x: Is it justified?

NTN is trading at a price-to-sales (P/S) ratio of 0.2x, which is considered good value compared to its industry peers. For context, the Japanese machinery industry average P/S ratio is 0.8x. This makes NTN substantially cheaper on this metric.

The price-to-sales multiple compares a company’s market value to its revenues. It is often used for companies in cyclical sectors or those with inconsistent earnings. This ratio is especially useful for manufacturing and machinery firms, where profits can fluctuate but sales remain a solid indicator of scale and market presence.

NTN’s discounted P/S ratio suggests that the market may be underestimating its revenue potential or longer-term recovery because the company’s sales figures remain strong despite recent profit challenges. If revenue growth continues and the push toward profitability materializes, this low multiple could mean current prices undervalue NTN’s true potential.

Result: Fair Value of ¥369.54 (UNDERVALUED)

See our latest analysis for NTN.

However, weak net income growth and a recent dip in analyst price targets could limit NTN’s upside if operational improvements stall.

Find out about the key risks to this NTN narrative.

Another View: Our DCF Model

Taking a step back from sales-based comparisons, our DCF model also points to NTN being undervalued at today’s price. When two different methods align, does it signal an overlooked opportunity or a risk worth reconsidering?

Look into how the SWS DCF model arrives at its fair value.

Stay updated when valuation signals shift by adding NTN to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own NTN Narrative

If you are not fully convinced by this perspective, or prefer digging into the numbers yourself, try building your own view in just minutes by using the following—Do it your way.

A great starting point for your NTN research is our analysis highlighting 3 key rewards and 3 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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