Meidensha (TSE:6508) Valuation in Focus After Jefferies Upgrade and New Profit Growth Outlook

Jefferies has just upgraded Meidensha (TSE:6508) after noting its outlook for profit growth starting in fiscal 2026. The firm cites growing electricity demand and favorable regulations for power transmission gear as key factors.

See our latest analysis for Meidensha.

Meidensha’s 1-day share price return of 5.6% turned heads and capped off a year-to-date surge of nearly 62%. Its total shareholder return over the past twelve months clocks in at an impressive 75%. Momentum has been building, supported by optimism over rising profits and a stronger outlook for the power transmission sector.

If Meidensha’s breakout has you rethinking what’s possible in this space, now is a perfect time to broaden your search and discover fast growing stocks with high insider ownership

With shares trading right at analysts' price targets after a dramatic run-up, investors are left to wonder if Meidensha’s strong growth outlook is already reflected in the current price or if there is still room for a meaningful upside from here.

Price-to-Earnings of 17.6x: Is it justified?

Meidensha's stock currently trades at a price-to-earnings (P/E) ratio of 17.6x, positioning it as good value compared to both its peer group and estimated fair value benchmarks.

The price-to-earnings ratio measures what investors are willing to pay today for a company's earnings. For Meidensha, a 17.6x multiple suggests the market is pricing in moderate profit growth and stability within the power equipment sector. The justified attractiveness of this multiple depends on the company’s ability to deliver on expected earnings growth over the coming years.

Compared to sector peers, Meidensha is trading at a notable discount. Its P/E ratio is significantly lower than the peer average of 32.3x and is also below the estimated fair P/E ratio of 19.4x. This points to a scenario where the market may not yet be fully pricing in Meidensha's recent profit growth and positive outlook, leaving room for potential valuation catch-up should expectations be met or exceeded.

Explore the SWS fair ratio for Meidensha

Result: Price-to-Earnings of 17.6x (UNDERVALUED)

However, risks remain. Slower-than-expected profit growth or regulatory setbacks could both limit further upside for Meidensha’s share price.

Find out about the key risks to this Meidensha narrative.

Another View: The SWS DCF Model Weighs In

Looking at Meidensha through the lens of our DCF model offers a different angle. The SWS DCF model estimates fair value at ¥7,847.55, about 11% above today’s price. This suggests the shares could have more upside than multiples alone might imply. But are DCF assumptions realistic, or is the market seeing risks beneath the surface?

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 Meidensha 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 853 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 Meidensha Narrative

If you see things differently or want to dive deeper into your own analysis, it takes less than three minutes to craft your own view. Do it your way.

A great starting point for your Meidensha research is our analysis highlighting 3 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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