3 Japanese Stocks Estimated To Be Up To 48.6% Below Intrinsic Value

October 06, 2024

Japan's stock markets recently experienced significant volatility due to political developments and monetary policy shifts, with the Nikkei 225 Index and TOPIX Index both declining. Despite this turbulence, opportunities may exist for investors seeking undervalued stocks that are trading below their intrinsic value. Identifying such stocks involves assessing factors like financial health, earnings potential, and market position amid current economic conditions.

Top 10 Undervalued Stocks Based On Cash Flows In Japan

Name	Current Price	Fair Value (Est)	Discount (Est)
Hagiwara Electric Holdings (TSE:7467)	¥3470.00	¥6808.79	49%
Densan System Holdings (TSE:4072)	¥2713.00	¥5299.51	48.8%
Akatsuki (TSE:3932)	¥2068.00	¥3772.62	45.2%
Kotobuki Spirits (TSE:2222)	¥1776.50	¥3434.73	48.3%
Stella Chemifa (TSE:4109)	¥4255.00	¥8092.75	47.4%
Pilot (TSE:7846)	¥4558.00	¥8874.56	48.6%
Hibino (TSE:2469)	¥3545.00	¥7039.05	49.6%
Infomart (TSE:2492)	¥325.00	¥617.44	47.4%
NATTY SWANKY holdingsLtd (TSE:7674)	¥3285.00	¥6029.15	45.5%
KeePer Technical Laboratory (TSE:6036)	¥4335.00	¥7837.01	44.7%

Click here to see the full list of 75 stocks from our Undervalued Japanese Stocks Based On Cash Flows screener.

Let's take a closer look at a couple of our picks from the screened companies.

Nippon Kayaku (TSE:4272)

Overview: Nippon Kayaku Co., Ltd. is a company that, along with its subsidiaries, develops, manufactures, and sells functional chemicals, pharmaceuticals, safety systems, and agrochemicals both in Japan and internationally; it has a market cap of ¥209.43 billion.

Operations: The company's revenue segments include Fine Chemicals at ¥59.50 billion, Life Science Business Unit at ¥62.72 billion, and Mobility & Imaging Business Unit at ¥84.83 billion.

Estimated Discount To Fair Value: 11.3%

Nippon Kayaku is trading at ¥1,281, below its estimated fair value of ¥1,444.3. While the stock is not significantly undervalued, it presents potential due to forecasted earnings growth of 34.4% annually, outpacing the Japanese market's 8.7%. Despite lower profit margins compared to last year and a dividend not well covered by cash flows, recent buybacks and revised upward corporate guidance indicate strategic financial management aimed at enhancing shareholder value.

TSE:4272 Discounted Cash Flow as at Oct 2024

Pilot (TSE:7846)

Overview: Pilot Corporation manufactures, purchases, and sells writing instruments, stationery products, and toys across Japan, the Americas, Europe, and Asia with a market cap of ¥176.93 billion.

Operations: The company's revenue segments are ¥20.93 billion from Asia, ¥84.15 billion from Japan, ¥25.87 billion from Europe, and ¥37.06 billion from the Americas.

Estimated Discount To Fair Value: 48.6%

Pilot is trading at ¥4,558, significantly below its estimated fair value of ¥8,874.56, indicating potential undervaluation. Earnings are projected to grow 9.7% annually, outpacing the Japanese market's average growth rate of 8.7%. Despite a dividend yield of 2.33% not being well covered by free cash flows, recent share buybacks and expansion into the Middle East reflect strategic moves to enhance market position and shareholder value over time.

TSE:7846 Discounted Cash Flow as at Oct 2024

KATITAS (TSE:8919)

Overview: KATITAS CO., Ltd. specializes in surveying, purchasing, refurbishing, remodeling, and selling used homes to individuals and families in Japan, with a market cap of ¥159.42 billion.

Operations: The company's revenue is primarily generated from its House for Resale Reproduction Business, amounting to ¥126.30 billion.

Estimated Discount To Fair Value: 35.8%

KATITAS is trading at ¥2,040, well below its estimated fair value of ¥3,177.57, highlighting potential undervaluation based on cash flows. Earnings have grown by 43.2% over the past year and are forecasted to grow annually by 9.8%, surpassing the Japanese market average of 8.7%. Despite being dropped from the FTSE All-World Index recently and having an unstable dividend track record, its revenue growth outlook remains robust at 7.4% per year.

TSE:8919 Discounted Cash Flow as at Oct 2024

Next Steps

Unlock more gems! Our Undervalued Japanese Stocks Based On Cash Flows screener has unearthed 72 more companies for you to explore.Click here to unveil our expertly curated list of 75 Undervalued Japanese Stocks Based On Cash Flows.
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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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