Oji Holdings (TSE:3861): Revisiting Valuation After Earnings Forecast Cut on Overseas Weakness

Oji Holdings (TSE:3861) caught investors’ attention after lowering its earnings forecast for the second quarter, mainly due to weaker profits in its overseas businesses. Domestic operations stayed steady. The full-year outlook is now under review.

See our latest analysis for Oji Holdings.

Oji Holdings’ share price has held up well despite the revised outlook, closing at ¥782.5 and posting a solid year-to-date share price return of 29.1%. Total shareholder returns tell an even stronger story, with a 41.2% gain over the past year and an impressive 86.5% over five years. This momentum is clearly building, suggesting long-term investors have been well rewarded even as short-term sentiment wavers on overseas headwinds.

If Oji's resilience against market shifts interests you, this could be the perfect moment to broaden your search and discover fast growing stocks with high insider ownership

With the stock still trading at a noticeable discount to analyst price targets and momentum running high, investors are left with a pivotal question: is Oji Holdings still undervalued or is the market already pricing in its future growth?

Price-to-Earnings of 30.7x: Is it justified?

Oji Holdings currently trades at a price-to-earnings ratio of 30.7x, positioning it well above its industry peers and fair value benchmarks, despite recent share price momentum.

The price-to-earnings (P/E) ratio reflects how much investors are willing to pay for every yen of current earnings. For Oji Holdings, this elevated multiple suggests optimism about future profit growth. It also raises questions given the company’s current earnings track record.

At 30.7x, Oji’s valuation looks expensive compared to the Japanese Forestry sector average of 12.1x and the broader Asian Forestry benchmark of 19.6x. Notably, the estimated fair price-to-earnings ratio is even lower at 21.4x. This signals that the stock is priced at a significant premium above what historical relationships might justify.

Explore the SWS fair ratio for Oji Holdings

Result: Price-to-Earnings of 30.7x (OVERVALUED)

However, ongoing overseas profit weakness and uncertainties around the full-year guidance could undermine recent momentum if these challenges persist or worsen.

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

Another View: SWS DCF Model Sees Value

Switching perspective, our SWS DCF model comes to a very different conclusion. This approach estimates Oji Holdings' fair value at ¥1,113.45, which is a significant 29.7% above the current share price. Instead of being overvalued, this view suggests the stock is undervalued based on its forecasted future cash flows.

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 Oji 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 848 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 Oji Holdings Narrative

If you think there’s another perspective or want to shape your own view, you can dive into the numbers and build your own take in just a few minutes. Do it your way

A great starting point for your Oji Holdings research is our analysis highlighting 2 key rewards and 4 important warning signs 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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