Is Mitsui Chemicals Worth a Closer Look After New Battery Materials Plant Announcement?

If you have Mitsui Chemicals on your radar, now is the time to give its stock a closer look. Whether you are thinking about holding steady, buying on momentum, or growing cautious after several years of gains, the latest numbers tell an interesting story. Just over the past week, the stock ticked up by 3.2% and in the last month it’s up by 4.7%, hinting that investors are sensing fresh momentum. Year to date, Mitsui Chemicals is boasting a solid 12.1% climb. Stretch out your lens a bit further and the five-year return stands at an impressive 77.4%. Even the three-year window shines at 48.8%. True, the one-year performance is flat at -0.1%, but the trend is still broadly positive if you look beyond the short-term noise.

So what is driving this movement? Market watchers have pointed to industry-wide optimism around advanced materials and specialty chemicals, as well as a steady flow of innovation headlines that cast Mitsui Chemicals as a key beneficiary. These tailwinds may be helping investors reconsider the company’s long-term growth potential and risk profile. That said, valuation tells its own story. Mitsui Chemicals registers a valuation score of 1 out of 6, suggesting the stock only checks one box for being undervalued by our usual methods. Does that mean you should steer clear, or is there another side to the story?

Let’s break down the main valuation approaches and see how Mitsui Chemicals stacks up. Stay tuned, because there is a more insightful way of judging value that we will explore at the end.

Mitsui Chemicals scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Mitsui Chemicals Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a popular valuation approach that estimates what a company is worth by projecting its expected future cash flows and then discounting them back to their present value, all expressed in today's yen. This helps investors gauge whether the current stock price represents good value compared to the company's earning power over time.

For Mitsui Chemicals, the most recently reported Free Cash Flow (FCF) is ¥64.8 billion. Analyst projections show some variation ahead, with expected FCF ranging from ¥88.4 billion in 2026 down to ¥15.6 billion in 2027, before climbing again to ¥46.5 billion by 2030. Beyond that, further growth estimates are extended by Simply Wall St, not direct analyst forecasts, indicating gradually increasing annual FCF over the following five years.

According to the DCF analysis, Mitsui Chemicals’s intrinsic value comes out at ¥4,659 per share. This is about 17.8% above the current market price, which implies the stock could be undervalued based on the market's growth outlook and cash flow assumptions.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Mitsui Chemicals.

Our Discounted Cash Flow (DCF) analysis suggests Mitsui Chemicals is undervalued by 17.8%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Mitsui Chemicals Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a reliable way to value profitable companies like Mitsui Chemicals because it directly ties a company’s stock price to its earnings power. Generally, a higher PE suggests expectations of stronger growth, lower risk, or higher quality. A lower PE can signal the reverse. However, what counts as a “normal” or “fair” PE ratio depends on how the market weighs the company’s growth outlook, profitability, and risks compared to industry norms.

Currently, Mitsui Chemicals is trading at a PE ratio of 47.6x. This figure is well above the Chemicals industry average of 13.0x and also outpaces the average for its peer group at 21.4x. While these benchmarks provide context, they do not account for the whole picture, such as Mitsui Chemicals’ specific growth rate, profit margins, or risk profile.

This is where the “Fair Ratio” from Simply Wall St comes in. The Fair Ratio is a proprietary benchmark that considers not just industry and size but also factors like earnings growth, profit margins, and risk. Because it is tailored to Mitsui Chemicals’ unique attributes, it offers a more holistic view than a simple peer or sector comparison. In this case, the Fair Ratio stands at 23.2x.

Comparing Mitsui Chemicals’ current PE ratio of 47.6x to the Fair Ratio of 23.2x, the stock appears to be trading at a significant premium to where its fundamentals suggest it should be. This points to an overvaluation relative to its current earnings and risk-adjusted prospects.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Mitsui Chemicals Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a powerful, easy-to-use tool where you set out your perspective on Mitsui Chemicals, linking the company’s story, such as its industry shifts, innovation, or restructuring, to concrete financial forecasts and then to a calculated fair value. On Simply Wall St’s Community page, millions of investors use Narratives to quickly align their view of a company’s future (like expected revenue growth, profit margins, or risks) with their buy and sell decisions by comparing their own Fair Value estimates to the current share price. Narratives automatically update whenever new information, such as earnings or news headlines, is released, so your outlook stays relevant. For example, around Mitsui Chemicals, some investors craft a bullish Narrative expecting robust specialty chemicals growth and assign a fair value close to ¥5,400 per share, while others, mindful of slow recovery and restructuring risks, see a fair value near ¥3,000. Narratives let you turn your insights into action, making stock analysis more dynamic and personally meaningful than simply following consensus figures. Do you think there's more to the story for Mitsui Chemicals? Create your own Narrative to let the Community know!

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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