Lasertec (TSE:6920) Valuation: Is the Recent Momentum Aligned With Its True Value?

Lasertec (TSE:6920) has caught the attention of investors following a stretch of strong monthly gains, with its stock up 22% over the past month. The company continues to draw interest as broader semiconductor demand trends remain in focus.

See our latest analysis for Lasertec.

Lasertec’s rally over the past month has helped recover some ground after a challenging year, but momentum is still building rather than fully restored. While the recent 21.8% one-month share price return stands out, the total shareholder return over the past year is still down more than 14%, which highlights that investors are balancing renewed optimism with lingering caution from earlier declines.

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The big question for investors now is whether Lasertec’s shares offer a compelling entry at current levels, or if the recent rally signals that the market has already priced in much of the company’s future growth potential.

Price-to-Earnings of 21.5x: Is it justified?

Lasertec trades at a price-to-earnings (P/E) ratio of 21.5x, slightly above its estimated fair P/E ratio of 21.4x. This suggests its current price is a touch higher than what models would predict as 'fair.' At the last close of ¥20,225, Lasertec is roughly in line with its calculated fair value, but this does raise questions about whether the current premium is justified given company and market dynamics.

The P/E ratio measures how much investors are willing to pay for each unit of earnings, making it a commonly used gauge of value in the technology and semiconductor sectors. For Lasertec, the P/E being almost equal to its fair benchmark implies that the market is closely tracking the stock's earnings power. Even a small premium can signal lofty expectations for continued growth or profitability.

Compared to its industry peers, Lasertec stands out by trading above the JP Semiconductor industry average P/E of 16.5x. This indicates the market sees it as more valuable and is pricing in more optimism for its future. Against the estimated fair ratio of 21.4x, this also suggests little margin of safety for buyers at current levels.

Explore the SWS fair ratio for Lasertec

Result: Price-to-Earnings of 21.5x (ABOUT RIGHT)

However, slower revenue and net income growth may limit Lasertec’s upside if semiconductor demand softens or if competition intensifies in coming quarters.

Find out about the key risks to this Lasertec narrative.

Another View: SWS DCF Model Weighs In

While Lasertec's price-to-earnings ratio suggests it is trading close to its fair value, our SWS DCF model presents a different perspective. This method values Lasertec at ¥10,085.09 per share, which is well below its current price and points to possible overvaluation. However, could the market be pricing in something the model is missing?

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 Lasertec 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 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 Lasertec Narrative

If you see the data differently or wish to form your own perspective, you can create a personalized analysis quickly. It takes less than three minutes. Do it your way

A great starting point for your Lasertec research is our analysis highlighting 2 key rewards and 1 important warning sign 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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