Sharp (TSE:6753): Assessing Valuation as New AQUOS sense10 Launch Highlights Global Expansion and AI Focus

Sharp (TSE:6753) has just unveiled the AQUOS sense10 smartphone, which comes with a more advanced Snapdragon 7s Gen 3 platform and enhanced AI capabilities. This move marks a step toward expanding its global smartphone presence.

See our latest analysis for Sharp.

Sharp’s latest smartphone rollout comes as its share price shows signs of renewed momentum. A 15.8% gain over the past 90 days stands out against this year’s earlier losses. While the 1-year total shareholder return remains negative, recent action suggests market sentiment may be warming after a prolonged downtrend.

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With Sharp’s shares rebounding and a fresh focus on AI-powered devices, is the recent momentum a sign of undervaluation and future upside? Or has the market already factored in the company’s growth potential?

Price-to-Earnings of 8.6x: Is it justified?

Sharp is trading at a price-to-earnings ratio of 8.6x, which is well below both its direct peers and the broader industry. The last close price stands at ¥857.5, further positioning the company as attractively valued compared to competitors.

The price-to-earnings ratio reflects what investors are willing to pay for each yen of earnings generated by Sharp. In the context of consumer durables, this multiple helps to quickly gauge how the market values expected earnings growth, stability, and profitability.

Sharp’s price-to-earnings ratio is significantly lower than the peer average of 29.9x and the industry average of 11.6x. This suggests the market is discounting future earnings more heavily than for its competitors. Compared to its estimated fair price-to-earnings ratio of 12.1x, there remains notable upside potential if sentiment or fundamentals improve to more normalized levels.

Explore the SWS fair ratio for Sharp

Result: Price-to-Earnings of 8.6x (UNDERVALUED)

However, recent declines in annual revenue and net income growth could weigh on sentiment if the turnaround in fundamentals does not materialize soon.

Find out about the key risks to this Sharp narrative.

Another View: What Does the SWS DCF Model Show?

While Sharp looks undervalued based on earnings multiples, our DCF model comes to a similar conclusion. Shares are currently trading just below our estimate of fair value, at ¥857.5 versus an intrinsic value of ¥858.98. Both approaches raise the question: has the market fully recognized Sharp’s turnaround?

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 Sharp 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 840 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 Sharp Narrative

If you want to dig deeper or believe there’s another angle worth considering, it’s easy to put together your own analysis in just a few minutes, so why not Do it your way

A great starting point for your Sharp research is our analysis highlighting 3 key rewards and 3 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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