NTT DATA Group (TSE:9613) has seen its share price draw attention lately, even though there has been no single headline-making event to explain the move. Sometimes, stocks get caught in a current of market sentiment where investors start reassessing their expectations. That seems to be happening with NTT DATA Group right now. With no major trigger in sight, this shift can leave shareholders and those on the sidelines questioning what is really driving the action.
Looking over the past year, the stock has quietly built significant momentum, gaining over 71%. It is not just a recent spike either. The long-term performance shows gains across three and five years as well, suggesting some fundamental shifts may be underway. Still, there have been moments of pullback, such as the dip over the past quarter, reminding investors that the ride has not been all one way.
After this impressive year, some may wonder if NTT DATA Group is shaping up as an undervalued bet or if markets are already factoring in future growth.
Advertisement
Price-to-Earnings of 39.2x: Is it justified?
NTT DATA Group appears overvalued when looking solely at its price-to-earnings ratio. Compared to the Japanese IT industry average and peers, its valuation stands out as notably expensive.
The price-to-earnings (P/E) ratio shows how much investors are willing to pay for each yen of the company’s net earnings. For tech companies, a higher P/E can reflect growth expectations, but it can also signal market optimism being built into the current price.
Here, NTT DATA’s P/E of 39.2x is well above industry and peer averages. This may mean that investors expect above-average earnings growth or see unique strengths in the company. Alternatively, it could suggest the shares are priced for perfection with little room for disappointing results.
However, slower revenue growth or a sudden shift in investor sentiment could quickly challenge the current valuation and momentum story for NTT DATA Group.
Taking a different approach, our DCF model suggests a strikingly different read on fair value. It indicates NTT DATA Group might be even more overvalued than initial multiples suggest. Which method should investors trust?
If you have a different perspective or would like to see how your own analysis compares, it is easy to create your own in just a few minutes. Do it your way
A great starting point for your NTT DATA Group research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.
Looking for More Smart Opportunities?
Strong returns rarely come to those who just watch from the sidelines. Use the Simply Wall Street Screener to connect with standout stocks built on real potential.
Uncover hidden gems among companies with robust financials by checking out penny stocks with strong financials. These stocks are powering growth beyond their size.
Tap into the future of medicine with advancements led by healthcare AI stocks, which is revolutionizing healthcare through artificial intelligence.
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.
Valuation is complex, but we're here to simplify it.
Discover if NTT DATA Group might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
Kshitija (or Keisha) Bhandaru is an Equity Analyst at Simply Wall St and has over 6 years of experience in the finance industry and describes herself as a lifelong learner driven by her intellectual curiosity. She previously worked with Market Realist for 5 years as an Equity Analyst.
