YONEX (TSE:7906): Assessing Valuation After a Three-Year Share Price Surge

YONEX (TSE:7906) has delivered a strong stretch in the market, with shares gaining nearly 12% over the past year and more than tripling over the past 3 years. Investors are taking note of the company’s consistent growth story.

See our latest analysis for YONEX.

YONEX’s share price has maintained remarkable momentum due to improving performance and increased market attention, achieving a 1-year total shareholder return of 118% and a share price that has nearly doubled since January. While this rapid rise suggests investors are increasingly optimistic about its growth prospects, it is also important to pay attention to how the valuation landscape is changing as expectations rise.

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But with YONEX’s share price surging so rapidly, the big question is whether this momentum still leaves room for upside or if the stock now fully reflects the company’s future growth. Is there still a buying opportunity, or has the market already priced it all in?

Price-to-Earnings of 29.4x: Is it justified?

At YONEX’s recent closing price, its shares are trading at a price-to-earnings (P/E) ratio of 29.4x. This positions the stock at a significant premium compared to both peers and broad sector averages.

The price-to-earnings ratio measures how much investors are willing to pay today for each yen of current earnings. It is a common indicator for companies like YONEX, especially in consumer durables, where earnings performance is watched closely. A high P/E ratio might imply enthusiasm about future profit growth, or it could simply mean buyers are paying up amid strong momentum.

YONEX’s current P/E multiple is well above the JP Leisure industry average of 14.5x and also exceeds the average for its closest peers, which stand at 16.9x. Moreover, the fair P/E ratio, based on forward-looking fundamentals, is estimated to be 18.3x. The market may eventually gravitate toward this level if growth does not continue to exceed expectations.

Explore the SWS fair ratio for YONEX

Result: Price-to-Earnings of 29.4x (OVERVALUED)

However, slowing revenue growth or a pullback from recent highs could quickly challenge the current optimism surrounding YONEX’s valuation.

Find out about the key risks to this YONEX narrative.

Another View: What About Fair Value?

While the premium price-to-earnings ratio hints at a richly valued stock, our DCF model offers a different perspective. According to the SWS DCF model, YONEX’s estimated fair value is ¥3,863.61, which is about 7% below the current share price. Could investor enthusiasm be running ahead of fundamentals?

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 YONEX 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 861 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 YONEX Narrative

If you want a deeper dive or a fresh perspective, you can analyze the numbers and craft your own view in a few minutes. Do it your way.

A great starting point for your YONEX research is our analysis highlighting 2 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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