Evaluating Morinaga (TSE:2201): Does the Sanrio Collaboration Signal Hidden Value?

The collaboration between Morinaga&Co (TSE:2201) and Sanrio has caught the market's interest, as both brands are well known in Japan's snack and character goods space. By joining forces, they stand to broaden product appeal and consumer reach.

See our latest analysis for Morinaga&Co.

Morinaga&Co’s collaboration with Sanrio arrives as momentum shows signs of recovery, with the stock notching a 10.7% gain in the past 90 days. While the latest share price stands at ¥2,658, short-term price moves have only partially offset this year’s modest decline. The total shareholder return over the past year is still slightly negative. However, long-term investors have seen robust results, with a three-year total shareholder return of 51.9%, which signals strong underlying performance despite some recent volatility.

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With the collaboration generating fresh buzz, the real question now is whether Morinaga&Co’s growth prospects are fully reflected in the current share price or if investors are being presented with a genuine buying opportunity.

Price-to-Earnings of 12.5x: Is it justified?

Morinaga&Co’s shares are trading at a price-to-earnings (P/E) ratio of 12.5x, noticeably below both peer and industry averages. This suggests a potential undervaluation at the latest close of ¥2,658.

The price-to-earnings ratio measures what investors are willing to pay today for a company’s earnings. For mature industries like food and beverage, this multiple is often used to compare companies’ relative value and profitability.

With Morinaga&Co’s P/E lower than the industry average and its own fair P/E estimate, the market appears to be underestimating the company’s earnings power. If the P/E multiple were to move closer to the industry level, there could be significant upside potential.

Result: Price-to-Earnings of 12.5x (UNDERVALUED)

Explore the SWS fair ratio for Morinaga&Co

However, slower revenue growth or a reversal in net income gains could limit upside potential and challenge confidence in Morinaga&Co’s current valuation.

Find out about the key risks to this Morinaga&Co narrative.

Another View: Discounted Cash Flow Insights

Switching to the SWS DCF model, Morinaga&Co appears even more undervalued. The DCF estimate suggests a fair value of ¥5,624.32, which is more than double the recent share price. This perspective challenges the market’s current stance and raises the question: could the stock’s true worth be significantly higher than investors realize?

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 Morinaga&Co 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 Morinaga&Co Narrative

If you have a different perspective or enjoy digging into the details yourself, you can shape your own view on Morinaga&Co in just a few minutes, and Do it your way

A great starting point for your Morinaga&Co research is our analysis highlighting 4 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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