3 Japanese Exchange Stocks Estimated To Be Trading At Up To 45.8% Discount

Japan's stock markets have shown notable gains recently, with the Nikkei 225 Index rising 3.1% and the broader TOPIX Index up 2.8%, driven in part by a weaker yen following the U.S. Federal Reserve’s significant rate cut. Amidst this positive momentum, identifying undervalued stocks can be particularly rewarding for investors seeking opportunities in a market where economic indicators suggest steady growth potential. In such an environment, a good stock is typically characterized by strong fundamentals, solid earnings potential, and trading at a price below its intrinsic value—offering substantial upside as market conditions improve.

Top 10 Undervalued Stocks Based On Cash Flows In Japan

Name	Current Price	Fair Value (Est)	Discount (Est)
Hagiwara Electric Holdings (TSE:7467)	¥3545.00	¥6793.68	47.8%
Stella Chemifa (TSE:4109)	¥4105.00	¥8107.69	49.4%
Avant Group (TSE:3836)	¥2150.00	¥3969.34	45.8%
I-PEX (TSE:6640)	¥1580.00	¥2913.65	45.8%
West Holdings (TSE:1407)	¥2533.00	¥5017.85	49.5%
Plus Alpha ConsultingLtd (TSE:4071)	¥2179.00	¥4152.53	47.5%
SaizeriyaLtd (TSE:7581)	¥5350.00	¥10078.21	46.9%
Kadokawa (TSE:9468)	¥3020.00	¥5574.56	45.8%
NATTY SWANKY holdingsLtd (TSE:7674)	¥3185.00	¥5945.84	46.4%
Visional (TSE:4194)	¥8510.00	¥16908.21	49.7%

Click here to see the full list of 78 stocks from our Undervalued Japanese Stocks Based On Cash Flows screener.

Let's uncover some gems from our specialized screener.

Nisshinbo Holdings (TSE:3105)

Overview: Nisshinbo Holdings Inc., with a market cap of ¥147.11 billion, operates in wireless communication, microdevices, automobile brakes, mechatronics, chemicals, textiles, and real estate sectors both in China and internationally.

Operations: The company's revenue segments include wireless communication (¥198.40 billion), brake systems (¥120.79 billion), microdevices (¥73.06 billion), precision mechanical equipment (¥53.07 billion), fiber (¥37.32 billion), chemicals (¥11.37 billion), and real estate (¥10.72 billion).

Estimated Discount To Fair Value: 36.4%

Nisshinbo Holdings is trading at ¥936, significantly below its estimated fair value of ¥1471.96. The company is expected to become profitable within the next three years, with earnings forecasted to grow by 31.17% annually. Despite this growth potential, its dividend yield of 3.85% isn't well covered by free cash flows or earnings. Recent Q2 2024 earnings calls highlighted ongoing financial improvements but also underscored challenges in debt coverage by operating cash flow.

• Our comprehensive growth report raises the possibility that Nisshinbo Holdings is poised for substantial financial growth.
• Click to explore a detailed breakdown of our findings in Nisshinbo Holdings' balance sheet health report.

Topcon (TSE:7732)

Overview: Topcon Corporation, with a market cap of ¥159.91 billion, develops, manufactures, and sells positioning, eye care, and smart infrastructure products both in Japan and internationally.

Operations: The company's revenue segments include ¥67.89 billion from the Eye Care Business and ¥148.60 billion from the Positioning Business.

Estimated Discount To Fair Value: 19.1%

Topcon is trading at ¥1517, below its estimated fair value of ¥1875.28. Despite a forecasted revenue growth of 5.4% per year, slower than the 20% benchmark, earnings are expected to grow significantly at 24.51% annually over the next three years, outpacing the JP market's 8.6%. However, profit margins have declined from last year and debt coverage by operating cash flow remains inadequate. Recent guidance projects net sales of ¥230 billion and an operating profit of ¥18 billion for FY2025.

• Our earnings growth report unveils the potential for significant increases in Topcon's future results.
• Dive into the specifics of Topcon here with our thorough financial health report.

Kadokawa (TSE:9468)

Overview: Kadokawa Corporation operates as an entertainment company in Japan with a market cap of ¥406.08 billion.

Operations: Kadokawa Corporation generates revenue through various segments, including Publication (¥143.28 billion), Animation/Film (¥46.36 billion), Web Service (¥20.44 billion), Game (¥28.63 million), and Education/Edtech (¥13.83 million).

Estimated Discount To Fair Value: 45.8%

Kadokawa is trading at ¥3020, significantly below its estimated fair value of ¥5574.56. Earnings grew by 23.8% over the past year and are expected to increase by 21.5% annually over the next three years, surpassing the JP market's growth rate of 8.6%. Despite a forecasted revenue growth of only 6.7% per year, Kadokawa remains highly undervalued based on discounted cash flow analysis and analysts predict a stock price rise of 22.5%.

• According our earnings growth report, there's an indication that Kadokawa might be ready to expand.
• Navigate through the intricacies of Kadokawa with our comprehensive financial health report here.

Turning Ideas Into Actions

• Unlock our comprehensive list of 78 Undervalued Japanese Stocks Based On Cash Flows by clicking here.
• Got skin in the game with these stocks? Elevate how you manage them by using Simply Wall St's portfolio, where intuitive tools await to help optimize your investment outcomes.
• Unlock the power of informed investing with Simply Wall St, your free guide to navigating stock markets worldwide.

Ready For A Different Approach?

• Explore high-performing small cap companies that haven't yet garnered significant analyst attention.
• Diversify your portfolio with solid dividend payers offering reliable income streams to weather potential market turbulence.
• Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management.

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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