Is DIC (TSE:4631) Still Undervalued After Its Recent Share Price Momentum?

DIC (TSE:4631) has quietly outperformed the market this year, and that steady climb has investors asking whether the specialty materials maker still offers value or if expectations are already baked into the price.

See our latest analysis for DIC.

At ¥3,786 per share, DIC’s steady year to date share price return of roughly low teens, supported by a three year total shareholder return above 70 percent, suggests momentum is still building as investors reassess its growth and earnings resilience.

If DIC’s quiet strength has caught your eye, it might be worth seeing what else is gaining traction by exploring fast growing stocks with high insider ownership today.

With earnings growing faster than sales and shares still trading below some estimates of intrinsic value, the key question is whether DIC is quietly undervalued or if the market is already pricing in its next leg of growth.

Price to earnings of 11.1x, is it justified?

On a last close of ¥3,786, DIC screens as undervalued when judged against its 11.1x price to earnings multiple and how peers are priced today.

The price to earnings ratio compares what investors pay for each unit of current earnings, and it is a central yardstick for mature materials and chemicals businesses like DIC. A lower multiple can suggest the market is skeptical about the durability of profits or may be underestimating future earnings power.

For DIC, the picture currently leans toward underpricing rather than exuberance. The shares change hands at 11.1x earnings, materially below both the Japanese peer average of 19.1x and the broader domestic chemicals industry at 12.6x. Relative to our estimated fair price to earnings ratio of 14.4x, there also appears to be scope for the market multiple to move higher if profitability proves more resilient than expected.

Explore the SWS fair ratio for DIC

Result: Price to earnings of 11.1x (UNDERVALUED)

However, softer revenue growth and limited upside to the current analyst price target could quickly cap sentiment if margins or demand disappoint from this point onward.

Find out about the key risks to this DIC narrative.

Another View: What Does Our DCF Say?

While earnings multiples flag DIC as cheap against peers, our DCF model is even more optimistic, suggesting the shares trade about 30.6 percent below an estimated fair value of roughly ¥5,456. If both signals are right, is the market still underestimating DIC’s cash flow potential?

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 903 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 want to test your own assumptions against the numbers, you can build a complete view in minutes with 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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