SCREEN Holdings (TSE:7735) Net Margin Holds Steady, Dividend Stability Questioned

SCREEN Holdings (TSE:7735) delivered a net profit margin of 14.9%, matching last year’s figure, while earnings are projected to rise 7.4% per year. Revenue is forecast to grow at 5.1% annually, just ahead of the 4.5% pace set by the broader Japanese market. However, earnings growth is expected to lag slightly behind the national rate of 7.8%. Investors will note the company has enjoyed remarkable annual earnings growth of 32.7% over the past five years, slowing to 11.3% in the most recent year, signaling a significant deceleration. With shares recently trading at ¥14,685, slightly above the DCF-derived fair value, the results paint a picture of continued, albeit moderating, growth coupled with attractive value indicators.

See our full analysis for SCREEN Holdings.

Next up, we’ll see how these headline numbers compare to the most popular market narratives, and whether the story that investors are telling holds up against the latest results.

See what the community is saying about SCREEN Holdings

Margins Hold Steady Despite Slower Uptick

• Net profit margin held at 14.9%, unchanged from last year, even as recent annual earnings growth slowed markedly to 11.3% from a 32.7% pace over the past five years. This signals that profitability is holding up as topline momentum cools.
• Analysts' consensus view sees the stabilizing margin as a sign that recurring service revenues and advanced packaging are starting to offset slowing demand in core wafer cleaning. However, they caution that ongoing cost pressures and flattish demand for key applications like NAND and logic could weigh on future expansion.
  • Consensus narrative notes ongoing industry digitization and AI demand are providing a buffer to margins despite a more moderate outlook for core equipment.
  • At the same time, shrinking demand for some segments and increased fixed costs highlight why bulls should not expect margin expansion to come easily going forward.
• To see how the evolving story balances manageable risks with sustained profitability, check out the consensus narrative for deeper context. 📊 Read the full SCREEN Holdings Consensus Narrative.

Valuation Discount Versus Peers

• SCREEN Holdings trades at a price-to-earnings ratio of 15x, substantially below both the Japanese semiconductor industry average of 19.7x and its direct peer average of 36.3x. This highlights a notable value gap even though shares now sit slightly above DCF fair value (current price: ¥14,685 vs DCF fair value: ¥14,389.97).
• Analysts' consensus view argues that this valuation discount could present upside if forecasted recurring revenue and margin improvements materialize, though any miss on growth or higher exposure to market risks could quickly shift sentiment.
  • Consensus points out that the analysts’ target price of ¥14,240 offers a gauge for balanced expectations, while the current premium to DCF fair value signals investors are pricing in sustained sector momentum.
  • Relative undervaluation compared to both peers and the broader market keeps SCREEN attractive to value-oriented investors, provided key risks around margin erosion and market dependency are contained.

Dividend Sustainability Remains Under Scrutiny

• The most significant risk identified in the data is uncertainty around the sustainability of the company’s dividend, with stability not confirmed and some minor flags on earnings quality and recent share price volatility.
• Analysts' consensus view notes that while ongoing revenue and margin trends support dividend-paying capacity for now, further margin compression or flatlining core demand could pressure payout policies.
  • With increased fixed costs and sector headwinds on the horizon, critics highlight that dividends may not see the same resilience as core operating margins if growth decelerates further.
  • Investors looking for stable income may want to keep a close eye on future disclosures as cash flow predictability will be key to dividend confidence.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for SCREEN Holdings on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your SCREEN Holdings research is our analysis highlighting 4 key rewards and 3 important warning signs that could impact your investment decision.

See What Else Is Out There

SCREEN Holdings faces lingering concerns around dividend sustainability and margin pressure. Future payouts may be at risk due to moderating growth and sector headwinds.

If stable income matters to you, uncover stocks with stronger and more reliable shareholder payouts by checking out these 1993 dividend stocks with yields > 3% now.

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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