3 Japanese Stocks That Could Be Trading At A Discount In August 2024

Japan's stock markets have experienced significant volatility recently, driven by shifts in central bank policies and global economic concerns. Despite these fluctuations, some stocks may present attractive opportunities for investors seeking undervalued assets. In this context, identifying stocks trading at a discount can be particularly appealing as market conditions stabilize and investor sentiment improves.

Top 10 Undervalued Stocks Based On Cash Flows In Japan

Name	Current Price	Fair Value (Est)	Discount (Est)
Strike CompanyLimited (TSE:6196)	¥3535.00	¥6623.17	46.6%
NittoseikoLtd (TSE:5957)	¥531.00	¥1015.77	47.7%
Insource (TSE:6200)	¥849.00	¥1617.21	47.5%
Members (TSE:2130)	¥748.00	¥1400.17	46.6%
Daiichi Kigenso Kagaku Kogyo (TSE:4082)	¥797.00	¥1576.00	49.4%
ServerworksLtd (TSE:4434)	¥2322.00	¥4323.86	46.3%
Fudo Tetra (TSE:1813)	¥2259.00	¥4412.84	48.8%
Premium Group (TSE:7199)	¥1778.00	¥3315.56	46.4%
BuySell TechnologiesLtd (TSE:7685)	¥3800.00	¥7519.04	49.5%
TORIDOLL Holdings (TSE:3397)	¥3764.00	¥7196.16	47.7%

Click here to see the full list of 73 stocks from our Undervalued Japanese Stocks Based On Cash Flows screener.

Let's explore several standout options from the results in the screener.

Toray Industries (TSE:3402)

Overview: Toray Industries, Inc. manufactures, processes, and sells a wide range of products including fibers and textiles, performance chemicals, carbon fiber composite materials, environment and engineering products, and life science products across Japan, China, North America, Europe, and internationally with a market cap of ¥1.15 trillion.

Operations: Toray Industries generates revenue from various segments, including Textiles (¥976.58 billion), Functional Chemicals Business (¥903.57 billion), Environment/Engineering Business (¥296.23 billion), Carbon Fiber Composite Material Business (¥291.31 billion), and Life Science Business (¥52.23 billion).

Estimated Discount To Fair Value: 13.3%

Toray Industries is trading 13.3% below its estimated fair value, indicating potential undervaluation based on cash flows. Despite a low forecasted return on equity (6.1%) and lower profit margins compared to last year, the company expects significant earnings growth of 25.7% annually over the next three years, outpacing the Japanese market average. Recent raised guidance for H1 2024 further supports positive cash flow prospects with revenue now expected at ¥1.31 trillion and core operating income at ¥70 billion.

• In light of our recent growth report, it seems possible that Toray Industries' financial performance will exceed current levels.
• Take a closer look at Toray Industries' balance sheet health here in our report.

Kawasaki Heavy Industries (TSE:7012)

Overview: Kawasaki Heavy Industries, Ltd. operates in aerospace systems, energy solutions and marine engineering, precision machinery and robotics, rolling stock, and motorcycle and engine businesses globally with a market cap of ¥701.33 billion.

Operations: The company's revenue segments are as follows: Aerospace Business: ¥435.40 billion, Power Sports & Engine: ¥594.38 billion, Energy Solutions & Marine: ¥388.09 billion, Precision Machinery / Robot: ¥249.35 billion, and Vehicle: ¥196.26 billion.

Estimated Discount To Fair Value: 32.7%

Kawasaki Heavy Industries is trading 32.7% below its estimated fair value, highlighting potential undervaluation based on cash flows. Despite a volatile share price and lower profit margins (1.7%) compared to last year (3.2%), the company expects significant earnings growth of 21.95% annually over the next three years, outpacing the Japanese market average. However, debt coverage by operating cash flow remains a concern, and its dividend yield of 3.34% is not well covered by free cash flows.

• The analysis detailed in our Kawasaki Heavy Industries growth report hints at robust future financial performance.
• Navigate through the intricacies of Kawasaki Heavy Industries with our comprehensive financial health report here.

Olympus (TSE:7733)

Overview: Olympus Corporation manufactures and sells precision machineries and instruments worldwide, with a market cap of ¥2.78 trillion.

Operations: Olympus generates revenue primarily from its Endoscopic Solutions segment at ¥606.89 billion and its Treatment Solutions segment at ¥347.46 billion.

Estimated Discount To Fair Value: 10.9%

Olympus is trading 10.9% below its fair value estimate of ¥2685.45, indicating potential undervaluation based on cash flows. Earnings are forecast to grow significantly at 24.7% per year, outpacing the Japanese market average of 8.6%. However, profit margins have declined from 14.4% to 2.9%, and return on equity is expected to be low at 16.4%. Recent executive changes aim to strengthen medical and legal functions, potentially enhancing corporate value and risk management.

• Our growth report here indicates Olympus may be poised for an improving outlook.
• Delve into the full analysis health report here for a deeper understanding of Olympus.

Taking Advantage

• Investigate our full lineup of 73 Undervalued Japanese Stocks Based On Cash Flows right here.
• Hold shares in these firms? Setup your portfolio in Simply Wall St to seamlessly track your investments and receive personalized updates on your portfolio's performance.
• Enhance your investing ability with the Simply Wall St app and enjoy free access to essential market intelligence spanning every continent.

Ready To Venture Into Other Investment Styles?

• Explore high-performing small cap companies that haven't yet garnered significant analyst attention.
• Diversify your portfolio with solid dividend payers offering reliable income streams to weather potential market turbulence.
• Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management.

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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