Kewpie (TSE:2809) Valuation in Focus After Butternaise Collaboration With Tillamook Launches

Kewpie (TSE:2809) has entered into a collaboration with Tillamook County Creamery Association to launch a limited-edition spread, Butternaise. This product blends Kewpie’s new organic mayonnaise with Tillamook’s extra creamy butter. The partnership aims to spark consumer curiosity and expand Kewpie’s reach.

See our latest analysis for Kewpie.

Kewpie’s share price has climbed nearly 30% year-to-date, with the latest momentum fueled by the Butternaise collaboration that has caught both consumer and investor attention. The company’s 12-month total shareholder return stands at 21.95%, highlighting steady long-term gains. Its five-year total return of 109.78% underscores resilient growth even before this recent strategic alliance.

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While Kewpie’s recent rally reflects enthusiasm over its innovation, some investors may wonder whether the current price still leaves room for upside, or if expectations for future growth are already fully reflected in the stock.

Price-to-Earnings of 21x: Is it justified?

Kewpie is currently trading at a price-to-earnings (P/E) ratio of 21x, positioning it above the average valuation level seen among both its industry and peer group. With the last close at ¥4,284, investors appear willing to pay a premium for Kewpie’s earnings relative to other food sector stocks.

The P/E ratio compares a company’s share price to its per-share earnings, showing how much the market is willing to pay for current profitability. For food and consumer goods firms in Japan, this metric is a key indicator of investor sentiment about growth and stability.

Kewpie's P/E multiple is not only higher than its direct peers (who average 18.5x), but also exceeds the wider Japanese food industry average of 16.1x. Compared to an estimated fair P/E of 17.5x, the current valuation may indicate that market optimism is ahead of underlying trends, potentially influenced by recent product launches and profit growth acceleration. However, this premium could decrease if earnings growth slows or peer valuations decline.

Explore the SWS fair ratio for Kewpie

Result: Price-to-Earnings of 21x (OVERVALUED)

However, if earnings growth slows or if there are industry-wide valuation declines, sentiment around Kewpie’s premium price and growth outlook could quickly shift.

Find out about the key risks to this Kewpie narrative.

Another View: SWS DCF Model Suggests Undervaluation

Looking beyond earnings ratios, the SWS DCF model provides a different perspective. It estimates Kewpie's fair value at ¥4,937, which is about 13% higher than its current share price. This suggests potential undervaluation and challenges the premium implied by the P/E ratio. Which view is closer to reality?

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 Kewpie 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 843 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 Kewpie Narrative

If you have a different take on Kewpie’s story or prefer to explore the numbers firsthand, it only takes a few minutes to shape your own perspective. Do it your way

A great starting point for your Kewpie research is our analysis highlighting 3 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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