TOMY Company (TSE:7867): Assessing Valuation After Mixed Half-Year Results and Stable Dividend Outlook

TOMY Company (TSE:7867) just released its first half fiscal 2026 results. Net sales rose by 6% compared to last year. However, operating and ordinary profit both declined slightly during the same period.

See our latest analysis for TOMY Company.

TOMY Company's announcement of stronger half-year sales but mixed profits has done little to shift market sentiment. The share price was down 1.5% on results day and still shows a year-to-date decline of 29%. Looking longer term, the three- and five-year total shareholder returns of 188% and 277% suggest that the company can deliver for patient investors, even if momentum has faded recently.

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With TOMY shares trading well below their recent highs, investors are left to wonder if the current weakness is masking genuine value or if the market is already factoring in every bit of the company's future growth potential.

Price-to-Earnings of 16.6x: Is it justified?

TOMY Company is currently trading at a Price-to-Earnings (P/E) ratio of 16.6x, which is notably higher than both industry peers and its own estimated fair value.

The Price-to-Earnings ratio measures how much investors are paying for each Yen of a company’s earnings. In the leisure sector, this multiple reflects expectations for future profit growth and market sentiment toward stability or risk. TOMY’s current P/E suggests investors are pricing in meaningful earnings performance or growth potential relative to others in the same space.

However, TOMY's P/E of 16.6x stands above the JP Leisure industry average of 13.9x and also exceeds its own fair P/E ratio estimate of 15.8x. This premium signals the market may be overestimating future returns, especially given the company’s slowing forecasted profit growth. If the market reverts to sector or fair-multiple standards, there could be a re-rating in the share price.

Explore the SWS fair ratio for TOMY Company

Result: Price-to-Earnings of 16.6x (OVERVALUED)

However, slower earnings growth and lingering market pessimism could undermine any near-term valuation rebound for TOMY shares.

Find out about the key risks to this TOMY Company narrative.

Another View: Discounted Cash Flow Tells a Different Story

Looking at TOMY Company from another angle, our DCF model estimates its fair value at ¥5,635, which is significantly higher than today’s price of ¥3,224. This indicates the shares are trading at a steep 43% discount. Does this suggest the market is being overly cautious, or might risks still be underestimated?

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 TOMY Company 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 865 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 TOMY Company Narrative

If you see things differently or want to dig into the numbers on your own terms, you can build a custom story from scratch in just a few minutes using Do it your way.

A great starting point for your TOMY Company research is our analysis highlighting 3 key rewards and 1 important warning sign 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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