Sompo Holdings (TSE:8630): Assessing Valuation After Forecast Upgrade, Dividend Hike, and Share Buyback Announcement

Sompo Holdings (TSE:8630) just announced a fresh share repurchase program and a higher quarterly dividend, while also raising its earnings guidance for the fiscal year. These moves signal growing confidence in the company’s outlook.

See our latest analysis for Sompo Holdings.

Sompo Holdings’ proactive moves have clearly ignited market momentum, with a year-to-date share price gain of nearly 22% and a one-year total shareholder return of 34%. While recent buybacks and dividend hikes grabbed headlines, it is the company’s sizable three- and five-year total shareholder returns—183% and 345%—that show long-term investors have benefited from both capital appreciation and reinvested dividends.

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With earnings forecasts surging and the recent rally boosting shares, the big question is whether Sompo Holdings’ fundamentals still offer hidden value or if the market has already priced in the company’s bright future.

Price-to-Earnings of 7.6x: Is it justified?

At a current price-to-earnings (P/E) ratio of 7.6x, Sompo Holdings is trading well below both its peer and industry average multiples. This signals the market sees the shares as attractively valued at ¥5,028 compared to competitors.

The P/E ratio tells investors how much they are paying for each yen of earnings and is especially relevant for evaluating insurance companies where stable profits are key. A low ratio can indicate market skepticism, but may also highlight an overlooked value opportunity.

Sompo’s 7.6x P/E stands in stark contrast to the Asian Insurance sector’s 10.8x and its peer average of 9.8x. When measured against the estimated fair P/E ratio of 11x, there is notable potential for a positive market re-rating, especially if growth trends hold up.

Explore the SWS fair ratio for Sompo Holdings

Result: Price-to-Earnings of 7.6x (UNDERVALUED)

However, slower annual net income growth and potential volatility in the insurance sector could limit near-term upside for Sompo Holdings shares.

Find out about the key risks to this Sompo Holdings narrative.

Another View: Discounted Cash Flow Tells a Bigger Story

While the price-to-earnings ratio hints at undervaluation, our SWS DCF model goes further and suggests that Sompo Holdings is trading at nearly half (48.2%) below its estimated fair value. This deeper discount raises an intriguing question: Could the market be overlooking something even bigger?

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 Sompo Holdings 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 919 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 Sompo Holdings Narrative

If you have your own perspective or want to dive deeper into the numbers, it only takes a few minutes to shape your personal view. Do it your way

A great starting point for your Sompo Holdings research is our analysis highlighting 4 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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