MTG (TSE:7806) Valuation Review Following Strong Net Sales and Profit Growth

MTG (TSE:7806) just revealed its latest results, capturing attention with a jump in net sales along with a significant increase in operating profits. Profit attributable to shareholders also soared, underscoring stronger management execution this year.

See our latest analysis for MTG.

Following these robust results, MTG’s stock has seen a remarkable run, with a 31.9% gain over the last week alone and a share price return of 142.4% year-to-date. Looking longer term, shareholders have benefited from a one-year total return of 166.7% and an impressive 306.6% over three years. This indicates that momentum is clearly accelerating.

If MTG’s breakout performance sparks your curiosity, it might be the perfect moment to broaden your search and discover fast growing stocks with high insider ownership

With such a powerful rally and remarkable financial results, the big question is whether MTG shares still have room to run, or if the current price already reflects all the future growth ahead. Could there still be a buying opportunity?

Price-to-Earnings of 24.3x: Is it justified?

MTG is trading at a price-to-earnings (P/E) ratio of 24.3x, which means the market is paying ¥24.3 for every ￥1 of the company’s earnings. With the latest close at ¥4,920, the current share price seems comparatively reasonable when aligned with peer and internal benchmarks.

The price-to-earnings ratio is a useful valuation tool, especially for consumer-focused companies like MTG. It gauges how much investors are willing to pay for each unit of profit. For MTG, a P/E of 24.3x signals that the market expects consistent profit growth or a solid earnings foundation.

This valuation stands out when compared to sector averages. MTG’s P/E ratio is better value than its peer average of 32.3x. This suggests the stock is priced more conservatively than many competitors. Compared to the Japanese Personal Products industry average of 24.2x, MTG is just slightly higher, which hints at expectations in line with sector trends. The estimated fair P/E ratio for MTG is 27.9x. This is a level the stock could potentially move towards if sentiment improves further.

Explore the SWS fair ratio for MTG

Result: Price-to-Earnings of 24.3x (UNDERVALUED)

However, shifting consumer trends or unexpected regulatory changes could challenge MTG's current momentum. These factors may impact its outlook despite recent strong performance.

Find out about the key risks to this MTG narrative.

Another View: SWS DCF Model Signals More Upside

While the price-to-earnings ratio suggests MTG is fairly valued, our SWS discounted cash flow (DCF) model offers a different perspective. According to this method, MTG shares are undervalued by about 18.8%, which hints at possible upside that the market may not have fully priced in yet. Could this alternative view point to a hidden opportunity?

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 MTG 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 879 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 MTG Narrative

If you have a different take or want to dig into the numbers yourself, you can build your own perspective from scratch in just a few minutes. Do it your way

A great starting point for your MTG 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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