A Fresh Valuation Perspective on Maruha Nichiro (TSE:1333) Following Stock Split and Shareholder-Friendly Moves

Maruha Nichiro (TSE:1333) drew investor attention after its board approved a stock split, amended its Articles of Incorporation to increase authorized shares, and maintained its quarterly dividend. The company is also exploring new shareholder benefits in anticipation of a planned name change.

See our latest analysis for Maruha Nichiro.

Maruha Nichiro’s steady stream of shareholder-focused moves, including a confirmed dividend and plans for a stock split, have added fuel to upbeat investor sentiment. The share price has climbed by 22% year-to-date, and the company’s 1-year total shareholder return of nearly 25% signals momentum is building for both long-term and short-term holders.

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With Maruha Nichiro's stock experiencing strong gains and a wave of shareholder-focused actions, the key question is whether the current price still offers value or if the market has already priced in the company's future growth potential.

Price-to-Earnings of 8.5x: Is it justified?

With Maruha Nichiro sporting a price-to-earnings ratio of 8.5x at a last close of ¥3,706, the stock stands out as relatively undervalued alongside its peers. The current valuation implies that investors are paying less for each yen of earnings compared to other companies in the same space.

The price-to-earnings (P/E) ratio measures how much investors are willing to pay for a company’s earnings. In sectors like food, a lower P/E can signal undervaluation, especially if the company has a stable track record of profits. Maruha Nichiro’s P/E of 8.5x is well below the peer average of 11.2x, which suggests the market is being cautious or possibly overlooking future potential.

This valuation becomes more significant when compared to industry benchmarks. Not only does Maruha Nichiro’s P/E sit below the peer average, but it also falls beneath the Japanese market’s average P/E of 13.9x. The market could be underappreciating the company’s consistent profit growth and strong fundamentals, potentially leading to a future re-rating as confidence builds.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Earnings of 8.5x (UNDERVALUED)

However, external headwinds or weaker profit growth could cause the market to reassess Maruha Nichiro’s undervalued status and impact sentiment quickly.

Find out about the key risks to this Maruha Nichiro narrative.

Another View: Discounted Cash Flow Says Overvalued

While Maruha Nichiro’s current price-to-earnings ratio suggests good value versus peers, our DCF model estimates a fair value of ¥3,237.39, which is below today’s share price of ¥3,706. This indicates the stock may actually be trading above what its future cash flows justify. Could the market be too optimistic, or is the business set for surprises?

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 Maruha Nichiro 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 926 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 Maruha Nichiro Narrative

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A great starting point for your Maruha Nichiro 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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