Hino Motors (TSE:7205) Valuation Analysis Following Extended Share Price Decline

Hino Motors (TSE:7205) shares have seen considerable movement in recent weeks, catching the attention of many investors who are evaluating its valuation after an extended decline. The stock is down 27% over the past month, which invites questions about near-term prospects.

See our latest analysis for Hino Motors.

The recent slide in Hino Motors’ share price mirrors a larger trend, with the stock’s year-to-date return showing a notable decline and its 1-year total shareholder return down nearly 22%. While momentum has faded, these moves are fueling ongoing debates about whether the current value reflects the business’s true potential or renewed concerns about risk.

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But do the recent declines mean Hino Motors is now trading at an attractive discount, or is the market fully factoring in the company’s future prospects? Is this a genuine buying opportunity, or is growth already reflected in the current price?

Price-to-Sales of 0.1x: Is it justified?

Hino Motors is trading at a price-to-sales ratio of 0.1x, significantly below both the industry average and its estimated fair ratio. This makes the current share price appear heavily discounted when compared to peers. With a last close of ¥363.5, investors may wonder if the market is underestimating the company’s value or simply reflecting fundamental challenges.

The price-to-sales (P/S) ratio compares a company’s market capitalization to its total sales. It offers a measure of how much investors are willing to pay for each unit of revenue. In capital goods and machinery sectors, this multiple is often used when earnings are negative or volatile, since it focuses on revenues rather than profits.

Trading at just 0.1x sales, Hino Motors stands out as good value compared to the average 0.7x P/S ratio for the JP Machinery industry. The company’s ratio is also well below the estimated fair price-to-sales ratio of 0.7x, indicating considerable headroom if market sentiment improves or fundamentals recover. These figures suggest substantial upside potential if Hino Motors can deliver on expected growth or margin improvements.

Explore the SWS fair ratio for Hino Motors

Result: Price-to-Sales of 0.1x (UNDERVALUED)

However, sustained weak revenue growth and ongoing net losses could continue to weigh on sentiment, which may limit any near-term recovery for Hino Motors shares.

Find out about the key risks to this Hino Motors narrative.

Another View: What Does the SWS DCF Model Say?

Looking from a different angle, our SWS DCF model suggests Hino Motors is undervalued as well, with its current price sitting more than 35% below the estimated fair value of ¥566.48. While both methods flag a significant discount, each uses different assumptions to reach this point. Could the DCF approach capture aspects of Hino’s potential that are missed by the market?

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 Hino Motors 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 Hino Motors Narrative

If you have a different perspective or would like to form your own view, you can explore the figures and shape your own conclusions in just a few minutes, or Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Hino Motors.

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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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