OBIC Business Consultants (TSE:4733): How Does the Latest Dividend Hike Reflect on Its Current Valuation?

OBIC Business Consultants (TSE:4733) just announced a hike in its second quarter dividend, raising it to ¥53 per share from ¥50 last year. This move signals the company’s continued focus on shareholder returns and financial strength.

See our latest analysis for OBIC Business Consultants.

The latest dividend increase adds to a year already marked by strong momentum, with the share price climbing over 29% year-to-date and a total shareholder return of nearly 23% over the past year. In addition, the stock's robust three-year total return of 110% suggests investors have remained optimistic, and the new dividend hike provides another confidence boost.

If OBIC's consistency caught your attention, now is a great time to broaden your search and discover fast growing stocks with high insider ownership

With OBIC's shares up almost 30% this year and trading about 14% below analyst price targets, investors have to ask whether a buying opportunity is emerging or if the market has already priced in the company’s growth.

Price-to-Earnings of 39.1x: Is it justified?

OBIC Business Consultants is currently trading at a price-to-earnings (P/E) ratio of 39.1x, which is significantly higher than both the industry average and the level our fair ratio analysis suggests is appropriate. At the last close price of ¥8,752, the stock appears expensive compared to its peers and broader benchmarks.

The price-to-earnings ratio measures how much investors are willing to pay today for a yen of current earnings. For software firms, higher P/E ratios can sometimes reflect strong growth prospects or premium returns on capital. However, they can also signal the market is pricing in ambitious expectations.

In OBIC's case, the market is pricing the stock well above the Japanese software industry’s average P/E of 21.4x and above our estimated fair P/E of 27.4x. This points to a substantial premium, suggesting that investors are betting on future performance outpacing both current results and industry norms. Should market sentiment shift or growth disappoint, there could be pressure for the multiple to return closer to sector or fair levels.

Explore the SWS fair ratio for OBIC Business Consultants

Result: Price-to-Earnings of 39.1x (OVERVALUED)

However, if revenue or net income growth slows, or if investor sentiment weakens, OBIC’s premium valuation could quickly come under pressure.

Find out about the key risks to this OBIC Business Consultants narrative.

Another View: Discounted Cash Flow Perspective

While the price-to-earnings ratio suggests OBIC is trading at a premium, our SWS DCF model tells a different story. According to this approach, OBIC’s current share price of ¥8,752 is well above our estimated fair value of ¥6,246.60. This indicates the stock may be overvalued from a cash flow standpoint.

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 OBIC Business Consultants 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 863 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 OBIC Business Consultants Narrative

If you’d rather dig into the numbers yourself or want a different angle, you can craft a personal narrative in just a few minutes. Do it your way

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding OBIC Business Consultants.

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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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