Assessing Asahi (TSE:2502) Valuation Following Major Treasury Share Buyback Program

Asahi Group Holdings (TSE:2502) has updated investors on its treasury share acquisition program, revealing the purchase of more than 19 million shares on the Tokyo Stock Exchange. This move is part of the capital management plan set by the Board.

See our latest analysis for Asahi Group Holdings.

Asahi Group Holdings’ recent treasury share buyback appears to be supporting confidence in the company’s long-term strategy, even as momentum has cooled off lately. The 1-year total shareholder return stands at -3.1%, but the 3- and 5-year total returns of 27.9% and 41.2% show that investors with patience have still come out ahead.

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With Asahi trading at a discount to analyst price targets and recent buybacks in focus, investors may wonder if this is the window to pick up shares before a rebound or if future growth has already been accounted for in the price.

Price-to-Earnings of 14.5x: Is it justified?

Compared to the last close of ¥1,686.5, Asahi Group Holdings is trading at a notably lower price-to-earnings (P/E) ratio than both its peers and industry benchmarks. This suggests the market may be undervaluing its current earnings performance.

The price-to-earnings ratio measures how much investors are willing to pay for each yen of earnings. For consumer beverage companies like Asahi, it is a popular metric for evaluating profitability against peers.

At 14.5x, Asahi’s P/E ratio is significantly below the Japanese peer group average of 56.8x and the Asian beverage industry average of 19.2x. This discount stands out, especially as the estimated fair ratio is higher. The market could re-rate the stock if earnings expectations hold or improve.

Explore the SWS fair ratio for Asahi Group Holdings

Result: Price-to-Earnings of 14.5x (UNDERVALUED)

However, ongoing sluggish revenue growth or an unexpected dip in net income could quickly undermine sentiment around Asahi’s undervaluation story.

Find out about the key risks to this Asahi Group Holdings narrative.

Another View: Discounted Cash Flow Model

While Asahi’s price-to-earnings ratio looks low, our DCF model presents an even stronger case for undervaluation. The SWS DCF model estimates fair value at ¥4,310.78, which is well above the current share price. Could this gap signal a buying opportunity, or do risks remain hidden in the numbers?

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 Asahi Group Holdings 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 840 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 Asahi Group Holdings Narrative

If you see things differently or enjoy diving into the details yourself, you can piece together your own big-picture view in just a few minutes. Do it your way

A great starting point for your Asahi Group Holdings research is our analysis highlighting 5 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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