YASKAWA Electric (TSE:6506): Valuation in Focus After Upgraded Earnings Outlook and Shifting Investor Sentiment

YASKAWA Electric (TSE:6506) just raised its full-year guidance, increasing forecasts for both revenue and profit for the fiscal year ending February 2026. This update comes just ahead of its Q2 earnings release.

See our latest analysis for YASKAWA Electric.

This guidance boost sends a signal that management is confident about turning things around, especially after last quarter's disappointing results and a stretch of declining analyst estimates. While recent share price gains have been modest, momentum could be building, with the latest share price at ¥3,178 and investors watching closely for signs of sustained improvement, particularly given the one-year total shareholder return is still slightly negative.

With sentiment shifting, this could be a great moment to discover fast growing stocks with high insider ownership and see what other promising names are on the move.

With the stock still languishing well below its highs despite stronger guidance, the big question is whether current prices leave YASKAWA undervalued or if markets are already anticipating a turnaround and pricing in brighter prospects.

Price-to-Earnings of 15.1x: Is it justified?

YASKAWA Electric is currently trading at a price-to-earnings (P/E) ratio of 15.1x, which is higher than the JP Machinery industry average of 13.2x. This suggests the market is valuing the company at a premium to its sector peers.

The P/E ratio measures how much investors are willing to pay for one unit of earnings. In manufacturing and industrial businesses like YASKAWA, it is commonly used to assess whether a stock is relatively cheap or expensive versus competitors or historical norms, based on profitability today and market expectations for the future.

This higher P/E could reflect investor optimism about YASKAWA's ability to turn recent performance around or expectations for earnings resilience despite slower growth projections. However, given current forecasts for revenue and profit declines, it invites scrutiny. Are markets banking too heavily on a rebound?

Notably, when compared to the estimated fair P/E ratio of 18.8x, YASKAWA’s valuation looks more conservative. This provides headroom for the market to re-rate the stock if fundamentals improve.

Explore the SWS fair ratio for YASKAWA Electric

Result: Price-to-Earnings of 15.1x (OVERVALUED)

However, weak earnings momentum and lackluster longer-term returns could limit upside if YASKAWA's turnaround does not materialize as management projects.

Find out about the key risks to this YASKAWA Electric narrative.

Another View: What Does the DCF Model Indicate?

Looking at our SWS DCF model, YASKAWA Electric is trading just above its estimated fair value, with a share price of ¥3,178 compared to a DCF-calculated fair value of ¥3,152. This suggests the market price is slightly lofty by this measure, raising the question of whether there is much upside at current levels.

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 YASKAWA Electric 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 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 YASKAWA Electric Narrative

If you want to take a different approach or dig into the numbers yourself, you can compose your own take on YASKAWA in just a few minutes. Do it your way.

A great starting point for your YASKAWA Electric research is our analysis highlighting 1 key reward and 4 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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