A Look at HOYA (TSE:7741) Valuation After Doubling Its Interim Dividend and Posting Profit Growth

HOYA (TSE:7741) caught investors’ attention after announcing a sharp increase in its interim dividend to 125 yen per share. This is more than double last year’s figure and was announced alongside a quarterly profit gain.

See our latest analysis for HOYA.

On the back of its sharp dividend hike and quarterly profit gain, HOYA’s momentum has clearly picked up steam. Its latest share price sits at ¥25,085, and it’s not just a short-term pop. The 1-month share price return of 17.1% and a soaring 38.9% over the last quarter reflect surging investor confidence. Its 1-year total shareholder return of 24.0% and an impressive 95.2% over three years underscore the stock’s ability to reward long-term holders.

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But with HOYA’s stock surging and trading above analyst targets, investors are left considering whether the current momentum is leaving the shares undervalued, or if the market is already pricing in every bit of its impressive growth story.

Price-to-Earnings of 40.8x: Is it justified?

HOYA is currently trading at a price-to-earnings (P/E) ratio of 40.8x, placing it well above both the industry average and its peers. With a last close of ¥25,085, this premium suggests investors are factoring in strong earnings potential.

The P/E ratio compares a company’s share price to its per-share earnings. It is a quick measure of how much investors are paying for each unit of profit. For medical equipment companies like HOYA, a high P/E can reflect market optimism around sustained profit growth and unique business quality.

However, with HOYA’s 40.8x multiple above the industry’s 15.4x and the peer average of 37.8x, the stock is clearly rated as more expensive than most. This level also exceeds our estimated Fair Price-to-Earnings Ratio of 36.8x, signaling the stock carries a valuation premium even when compared to a fair market rate.

Explore the SWS fair ratio for HOYA

Result: Price-to-Earnings of 40.8x (OVERVALUED)

However, a premium valuation exposes HOYA to sharper corrections if profit growth slows or if broader market sentiment toward high-multiple stocks shifts suddenly.

Find out about the key risks to this HOYA narrative.

Another View: What Does the SWS DCF Model Say?

While the price-to-earnings approach points to an expensive stock, our SWS DCF model brings a sharper contrast. Based on cash flow estimates, HOYA’s fair value sits at ¥18,442, meaning today’s price is well above those projections. Could optimism be outpacing fundamentals?

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 HOYA 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 HOYA Narrative

If you have a different perspective or want to dive into the numbers for yourself, it only takes a few minutes to develop your own view using Do it your way.

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding HOYA.

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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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