Stock Analysis

3 Japanese Exchange Stocks Estimated To Be Up To 49.6% Below Intrinsic Value

Published October 09, 2024

Japan's stock markets have recently faced volatility, influenced by political changes and global economic tensions, leading to declines in key indices such as the Nikkei 225 and TOPIX. Despite these challenges, opportunities may exist for investors seeking undervalued stocks that could potentially offer value amidst current market conditions. In this context, identifying stocks trading below their intrinsic value can be particularly appealing for those looking to capitalize on potential market inefficiencies.

Top 10 Undervalued Stocks Based On Cash Flows In Japan

Name	Current Price	Fair Value (Est)	Discount (Est)
Densan System Holdings (TSE:4072)	¥2684.00	¥5299.14	49.4%
Hagiwara Electric Holdings (TSE:7467)	¥3445.00	¥6714.08	48.7%
Akatsuki (TSE:3932)	¥2043.00	¥3760.59	45.7%
Kotobuki Spirits (TSE:2222)	¥1835.00	¥3434.73	46.6%
Stella Chemifa (TSE:4109)	¥4370.00	¥8135.00	46.3%
Pilot (TSE:7846)	¥4674.00	¥8905.53	47.5%
Hibino (TSE:2469)	¥3520.00	¥6941.84	49.3%
Plus Alpha ConsultingLtd (TSE:4071)	¥2206.00	¥4392.95	49.8%
freee K.K (TSE:4478)	¥3145.00	¥6066.18	48.2%
Money Forward (TSE:3994)	¥5944.00	¥11794.36	49.6%

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

Let's dive into some prime choices out of the screener.

Money Forward (TSE:3994)

Overview: Money Forward, Inc. offers financial solutions for individuals, financial institutions, and corporations mainly in Japan with a market cap of ¥324.20 billion.

Operations: The company generates revenue from its Platform Services Business, which amounts to ¥36.16 billion.

Estimated Discount To Fair Value: 49.6%

Money Forward is trading at ¥5944, significantly below its estimated fair value of ¥11794.36, indicating it may be undervalued based on cash flows. The company is expected to achieve profitability within three years, with earnings projected to grow by 68.12% annually and revenue by 20.7% per year—outpacing the broader Japanese market. Recent strategic moves include a potential agreement with Sumitomo Mitsui Card Company and restructuring its fintech business for enhanced focus and growth.

TSE:3994 Discounted Cash Flow as at Oct 2024

freee K.K (TSE:4478)

Overview: freee K.K. provides cloud-based accounting and HR software solutions in Japan, with a market cap of ¥184.30 billion.

Operations: Revenue Segments (in millions of ¥): The company generates income from its cloud-based accounting and HR software solutions in Japan.

Estimated Discount To Fair Value: 48.2%

freee K.K. is trading at ¥3145, significantly below its estimated fair value of ¥6066.18, highlighting potential undervaluation based on cash flows. The company anticipates becoming profitable in three years, with revenue growth forecasted at 18.2% annually, surpassing the Japanese market average. Despite recent volatility in share price and executive changes, including a new CPO appointment, freee K.K.'s strategic focus remains on expanding business activities and enhancing its ERP system offerings.

TSE:4478 Discounted Cash Flow as at Oct 2024

Trend Micro (TSE:4704)

Overview: Trend Micro Incorporated develops and sells security-related software for computers and related services both in Japan and internationally, with a market cap of ¥1.09 trillion.

Operations: The company's revenue is generated from several regions, with ¥84.17 billion from Japan, ¥63.59 billion from Europe, ¥70.46 billion from the Americas, and ¥126.28 billion from the Asia Pacific region.

Estimated Discount To Fair Value: 36.2%

Trend Micro is trading at ¥8342, significantly below its estimated fair value of ¥13080.61, suggesting undervaluation based on cash flows. The company is forecast to experience strong earnings growth of 21.7% annually, outpacing the Japanese market average. Recent product innovations and strategic partnerships, such as the launch of Trend Micro Check and collaboration with GMI Cloud, bolster its position in AI-driven cybersecurity solutions despite a decline in profit margins from last year.

TSE:4704 Discounted Cash Flow as at Oct 2024

Where To Now?

Embark on your investment journey to our 78 Undervalued Japanese Stocks Based On Cash Flows selection here.
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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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