Calbee (TSE:2229) Valuation in Focus Following Share Buyback Authorization

Calbee (TSE:2229) caught investors’ attention after its Board authorized a share buyback of up to 4,000,000 shares for ¥10,000 million. The move is intended to boost shareholder returns and improve capital efficiency.

See our latest analysis for Calbee.

Calbee’s share buyback announcement comes after a steady recovery in its stock, with a 5.7% gain in the last 90 days helping to offset a year-to-date share price return of -6.2%. Over the past year, total shareholder return stands at -8.9%. However, the three- and five-year figures are both in positive territory, suggesting the company maintains long-term resilience even as near-term momentum is just beginning to build again.

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With shares still trading at a modest discount to analyst targets, the key question is whether Calbee is actually undervalued or if the market is already factoring in expectations for renewed growth. Is this the next buying opportunity?

Price-to-Earnings of 20.9x: Is it justified?

Calbee’s shares are currently trading at a price-to-earnings (P/E) ratio of 20.9x. This places it between analyst price targets and its recent market price, offering an initial signal that the stock is not cheap relative to its trailing earnings.

The P/E ratio measures how much investors are paying for each yen of earnings, making it a core metric when assessing consumer-focused brands such as Calbee. It helps show whether expectations for future profit growth are already baked into the share price. In Calbee’s case, the P/E suggests investors are willing to pay a premium over some peers for the company’s earning power.

Compared to peer averages, Calbee’s P/E of 20.9x is lower than the sector average (24x). This may imply some trader skepticism or perhaps a market discount. However, it is notably higher than both the JP food industry average (16x) and its own estimated fair P/E ratio (18.7x), raising tough questions about the sustainability of its earnings and market sentiment going forward. The market could adjust toward the fair P/E level if growth expectations are not met.

Explore the SWS fair ratio for Calbee

Result: Price-to-Earnings of 20.9x (ABOUT RIGHT)

However, sluggish revenue growth and market skepticism around earnings could challenge Calbee’s ability to sustain recent gains and deliver on renewed investor optimism.

Find out about the key risks to this Calbee narrative.

Another View: What Does Our DCF Model Say?

The SWS DCF model comes to a different conclusion. According to this analysis, Calbee’s stock is trading about 7.4% below its calculated fair value of ¥3,140. This finding implies it may actually be undervalued, despite its relatively high earnings ratio. Could the market be missing something deeper about Calbee’s prospects?

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 Calbee 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 846 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 Calbee Narrative

If you see things differently or want to dig deeper into the numbers, you can craft your own perspective on Calbee’s outlook in just a few minutes by clicking here: Do it your way.

A great starting point for your Calbee 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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