Assessing DIC (TSE:4631)’s Valuation After Its Recent Steady Share Price Climb

DIC (TSE:4631) has quietly extended its steady climb, with the share price edging higher over the past month and the past 3 months as investors revisit this long cycle specialty materials name.

See our latest analysis for DIC.

That steady climb also caps a solid run, with a year to date share price return of about 12 percent and a three year total shareholder return above 75 percent. This suggests momentum is quietly building as investors reassess DIC's earnings resilience and valuation.

If DIC's slow burn rerating has you thinking about what else the market might be warming up to, now is a good time to explore fast growing stocks with high insider ownership.

With earnings still growing, shares trading below intrinsic value estimates, and only a modest discount to analyst targets, the key question now is simple: is DIC a quiet value opportunity or already priced for its next leg of growth?

Price to Earnings of 11.1x: Is it justified?

On our numbers, DIC trades on a price to earnings ratio of 11.1 times, which looks undervalued against both its own fair ratio and sector peers at the current ¥3790 share price.

The price to earnings multiple compares what investors pay today with the company’s current earnings. This makes it a core yardstick for a mature, steadily profitable chemicals group like DIC. A lower multiple here suggests the market is not fully pricing in its recently restored profitability and moderate forward earnings growth.

Set against the estimated fair price to earnings ratio of 14.4 times, the current 11.1 times implies meaningful headroom if sentiment continues to normalise. It already stands at a sharp discount to both the peer average of 19 times and the broader JP chemicals industry at 12.6 times. That combination points to a company the market is still pricing below where fundamentals and regression based fair values suggest it could trade if confidence improves.

Explore the SWS fair ratio for DIC

Result: Price-to-Earnings of 11.1x (UNDERVALUED)

However, cost inflation, slower demand in key packaging and electronics end markets, or execution missteps on growth projects could quickly stall DIC's rerating story.

Find out about the key risks to this DIC narrative.

Another View: What Does Our DCF Say?

Our DCF model presents an even starker picture, putting fair value for DIC around ¥5470 per share, roughly 31 percent above the current ¥3790 level. If the cash flow assumptions hold, is the market overlooking a margin of safety, or correctly discounting execution and cycle risk?

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 DIC 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 898 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 DIC Narrative

If you see the story differently, or simply prefer digging into the numbers yourself, you can build a personalised view in under three minutes: Do it your way.

A great starting point for your DIC research is our analysis highlighting 4 key rewards and 3 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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