Iwatani (TSE:8088): Assessing Valuation with Share Price Momentum Cooling

Iwatani (TSE:8088) has experienced some stock price shifts recently, prompting investors to look closely at the company’s current valuation compared to historical returns and underlying growth trends. Let’s break down where things stand.

See our latest analysis for Iwatani.

Momentum for Iwatani’s share price has cooled after modest shifts this year. The latest close at ¥1,589 reflects a slight downward trend. Despite some movement, the 1-year total shareholder return is still slightly negative, suggesting that optimism around underlying growth has yet to spark stronger buying interest.

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With Iwatani’s recent pullback and a modest discount to analyst targets, is there real value to be found here? Or are investors merely paying up for growth that is already fully anticipated by the market?

Price-to-Earnings of 10.4x: Is it justified?

Iwatani’s shares are trading at a price-to-earnings (P/E) ratio of 10.4x, making them appear somewhat expensive compared to similar companies. The last close was at ¥1,589, which places Iwatani’s multiple slightly above the average of industry peers.

The P/E ratio measures how much investors are paying for each ¥1 of Iwatani’s earnings. It is a widely used indicator for valuing companies, especially in stable, earnings-generating sectors like oil and gas. A high P/E can suggest investors expect stronger future growth, while a low P/E may indicate lower expectations or undervaluation.

For Iwatani, the 10.4x multiple sits just above the peer average of 10x, indicating that the market may be pricing in anticipated earnings growth or other favorable conditions. However, when compared to the broader Asian oil and gas industry, which trades at an average P/E of 13x, Iwatani’s shares look more reasonably valued. Based on a fair price-to-earnings ratio estimate of 15.3x, there could be room for the market to re-rate the stock higher if company fundamentals hold up.

Explore the SWS fair ratio for Iwatani

Result: Price-to-Earnings of 10.4x (ABOUT RIGHT)

However, soft returns over the past year and slowing revenue growth could challenge recent optimism if these trends persist or worsen.

Find out about the key risks to this Iwatani narrative.

Another View: DCF Suggests Overvaluation

Taking a different approach, the SWS DCF model values Iwatani at ¥1,171.07 per share. This figure is notably below its current price of ¥1,589, indicating that the stock is trading at a premium compared to its estimated cash flow value. This raises the question of whether the market anticipates factors not captured in the model’s forecast or if there is a degree of caution 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 Iwatani 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 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 Iwatani Narrative

If the current analysis does not quite fit your perspective, you can easily take the data into your own hands and build your personal view in just minutes. Do it your way

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