SECOM (TSE:9735) Valuation in Focus After Share Buyback and Updated Earnings Guidance

SECOM (TSE:9735) just completed a repurchase of 617,800 shares as part of a larger buyback initiative and also released updated guidance for sales and profits for the coming fiscal year. Both moves are front and center for investors.

See our latest analysis for SECOM.

SECOM’s recent buyback and updated earnings guidance arrive as its shares have rebounded modestly, with a 2.4% gain over the past month helping offset earlier weakness. While its one-year total shareholder return stands at 4.3%, the three-year total return of 36.5% shows steady long-term momentum is very much intact, even as short-term price momentum has softened.

If you're watching how buybacks and new guidance shape investor sentiment, it's worth exploring the broader market and discovering fast growing stocks with high insider ownership

With SECOM trading about 20 percent below its estimated intrinsic value and fresh guidance already signaling steady growth, investors are left to ask whether this is a window to buy at a discount or if the market has already priced in the next leg of future gains.

Price-to-Earnings of 20x: Is it justified?

SECOM is trading at a price-to-earnings (P/E) ratio of 20x, which puts it well above both its sector and peer benchmarks. This is the case even after the recent price pullbacks.

The price-to-earnings multiple measures how much investors are willing to pay for each unit of annual earnings. For SECOM, this ratio can reflect the company’s stability, growth expectations, or market sentiment around its core business in commercial services.

With the industry P/E at just 13.5x, SECOM’s premium is notable. The market is judging that SECOM deserves a higher valuation, possibly due to its reliable dividend and resilient track record. However, when compared to the estimated fair P/E of 21.4x, there is an argument that the market might not be assigning SECOM its full potential value based on underlying fundamentals and the forward earnings outlook.

Explore the SWS fair ratio for SECOM

Result: Price-to-Earnings of 20x (ABOUT RIGHT)

However, slower revenue growth or unexpected macroeconomic pressures could challenge SECOM’s steady momentum and cause investors to re-evaluate its premium valuation.

Find out about the key risks to this SECOM narrative.

Another View: Discounted Cash Flow Says Undervalued

Shifting to our DCF model, SECOM is trading nearly 20 percent below its estimated fair value of ¥6,630. This method cuts through market sentiment and focuses on future cash flows. It suggests that today’s price might actually underappreciate the company’s longer-term earning potential. Could this gap be an opportunity, or is it a sign the market anticipates slower growth ahead?

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 SECOM 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 879 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 SECOM Narrative

If you see things differently or want to dig deeper on your own terms, you can craft a personalized take in just minutes, and Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding SECOM.

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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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