HOYA (TSE:7741): Evaluating Valuation After Recent Share Price Surge

HOYA (TSE:7741) has seen its share price fluctuate recently, sparking conversations among investors who are weighing the company’s recent performance in relation to broader market movements and HOYA’s long-term return history.

See our latest analysis for HOYA.

HOYA’s share price has been quite active in recent months, with a surge of over 20% in the last quarter. This hints at renewed investor optimism, even after a short-term dip this past week. Looking at the bigger picture, the company has delivered a solid 3.5% total shareholder return over the past year and an impressive 83% return over five years. This suggests momentum is intact for long-term holders.

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Given HOYA’s recent rally and strong long-term returns, the key question is whether the current valuation leaves room for further upside or if the market has already factored in all future growth potential.

Price-to-Earnings of 35.8x: Is it justified?

HOYA is currently trading at a price-to-earnings (P/E) ratio of 35.8x, which places it well above the average for its industry and signals the market is attaching a high premium to its earnings.

The price-to-earnings ratio shows how much investors are willing to pay for each yen of HOYA’s earnings. It is a key barometer for companies like HOYA in the healthcare equipment sector because it reflects investor confidence about the sustainability and growth of profits.

Compared to the Japanese Medical Equipment industry, which trades at a much lower average P/E of 15.5x, HOYA appears expensive. In comparison with its direct peer group average of 52.5x, however, HOYA looks more reasonably priced. The estimated fair P/E ratio for HOYA is 34.9x, suggesting the current valuation is not far off from what fundamentals and market trends might dictate.

Explore the SWS fair ratio for HOYA

Result: Price-to-Earnings of 35.8x (OVERVALUED)

However, slower revenue growth or unexpected industry headwinds could quickly challenge the market’s optimism around HOYA’s elevated valuation.

Find out about the key risks to this HOYA narrative.

Another Perspective: Discounted Cash Flow Model

Looking at HOYA through the lens of the SWS DCF model provides a different angle. The model estimates the company's fair value at ¥18,764, which is about 16% below the current share price. This finding challenges the optimism built into the market price. Have investors gotten ahead of themselves, or does HOYA have more surprises in store?

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 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’d rather take your own approach or believe there’s a different story to tell, you can dive into the data and shape your own view in just minutes, 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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