Does House Foods Group Offer Value After Three Years of Modest Growth?

If you are weighing your next move with House Foods Group stock, you are not alone. Plenty of investors are tracking this staple of Japan’s packaged foods scene and asking whether now is the moment to buy, hold, or wait it out. While the company’s returns have been steady if unspectacular lately, with a 0.4% gain over the last week, 3.6% for the past month, and 2.2% year-to-date, the longer-term picture is a bit more mixed. There has been a 4.9% uptick over the past three years, but a 13.9% drop since five years ago.

What’s driving these numbers? Much of the recent stability seems to reflect the market’s perception that House Foods Group is a safe, defensive choice, especially as food and consumer staples continue to draw attention during periods of global uncertainty. Overall, the slight gains and flat one-year returns suggest that risk sentiment about the stock has not shifted drastically in the last twelve months, at least not in response to any major news.

Of course, what matters most for value-focused investors is whether House Foods Group stock is undervalued right now. The company’s current valuation score, a 3 based on passing 3 out of 6 key undervaluation checks, points to some potential, but it is not a clear-cut bargain either. So, what drives this score, and what can different valuation approaches reveal? Let’s break down the methods one by one and see how they apply. Then, look ahead to a more revealing way of judging whether this stock truly offers value.

Why House Foods Group is lagging behind its peers

Approach 1: House Foods Group Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s value by projecting its future cash flows and discounting them back to today. For House Foods Group, this involves looking at both analyst forecasts for the next several years and longer-term estimates based on past performance and trends in the packaged foods industry.

Currently, House Foods Group generates Free Cash Flow (FCF) of ¥11.5 billion. Analyst projections show this figure could rise steadily in coming years, with Simply Wall St extrapolating annual FCF to reach ¥14.8 billion by 2028 and over ¥16 billion a decade out. These projections are made using a two-stage Free Cash Flow to Equity model, which balances near-term analyst estimates with longer-term assumptions using modest growth rates.

Based on these calculations, the DCF model sets the fair value of House Foods Group shares at ¥3,810.91. This is approximately 23.0% higher than the current share price, so the stock appears undervalued according to this approach.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for House Foods Group.

Our Discounted Cash Flow (DCF) analysis suggests House Foods Group is undervalued by 23.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: House Foods Group Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies like House Foods Group because it ties the company’s share price directly to its earnings performance. For investors, the PE ratio helps put current performance in context, especially when comparing companies within the same industry or across different markets.

Growth outlook and risk, however, play a big role in what counts as a “normal” or “fair” PE ratio. Higher growth expectations typically justify a higher PE, while elevated risk or uncertainty often result in a lower one. Industry context also shapes these benchmarks, as does the profitability and scale of the company itself.

House Foods Group is currently trading at a PE ratio of 25x. This puts it just below the average of its peers (27x), and notably above the broader Food industry average of 17x. On paper, this suggests House Foods Group is priced higher than most industry competitors on the basis of earnings.

This is where Simply Wall St’s “Fair Ratio” comes into play. The Fair Ratio for House Foods Group is 19x. This metric factors in not just industry norms, but also the company’s own earnings growth, profit margins, size, and specific risk profile. Unlike simple peer or industry comparisons, this proprietary metric adjusts for each company’s unique characteristics and offers a more nuanced view of valuation.

Comparing the current PE of 25x to the Fair Ratio of 19x, House Foods Group appears to be trading above what would be considered fair value based on its fundamentals and risk profile.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your House Foods Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is your unique investment story. It allows you to connect your beliefs about a company’s future, such as projected revenue, earnings, and margins, with a financial forecast, which then produces a Fair Value estimate. Narratives are easy to use and available right within Simply Wall St’s Community page, trusted by millions of investors worldwide.

With Narratives, you can quickly see how your assumptions translate into an actionable Fair Value, and then compare that value to the current share price to help you decide when to buy or sell. They are also dynamic, updating as soon as fresh information, like news or earnings reports, becomes available. This keeps your perspective current.

For example, using House Foods Group, some investors see strong long-term growth and set higher Fair Values, while others with a more cautious outlook end up with much lower valuations, all within the same platform.

By creating or exploring Narratives, you can turn financial data into a living story that brings clarity and confidence to your investment decisions.

Do you think there's more to the story for House Foods Group? Create your own Narrative to let the Community know!

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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