A Fresh Look at Brother Industries (TSE:6448) Valuation After Latest Business Printer Launch

Brother Industries (TSE:6448) just rolled out its next generation of business color laser printers and all-in-ones, targeting the needs of small and midsize businesses. This launch introduces new features for workplaces that prioritize efficiency and security.

See our latest analysis for Brother Industries.

Amid new product launches and a completed share buyback, Brother Industries’ 1-year total shareholder return stands at -10.94%, reflecting both shifting sentiment and a market recalibrating its expectations. However, the longer-term outlook remains strong with a 92.15% five-year total return, which speaks to its potential if momentum resumes.

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Yet with shares now trading at a meaningful discount to analyst targets, investors may wonder whether the current price truly underestimates Brother’s growth potential, or if the market has already factored in the upside.

Price-to-Earnings of 13.1x: Is it justified?

Brother Industries currently trades at a price-to-earnings ratio of 13.1, just below the Japanese tech sector average. The latest closing price of ¥2,591.5 sits at a considerable discount to both its estimated fair value and analyst expectations.

The price-to-earnings (P/E) ratio is one of the most commonly used valuation measures and tells investors how much they are paying for each unit of earnings. In tech manufacturing, it can signal whether growth potential and profitability are reflected in the stock’s price.

This P/E suggests the market may not be pricing in the company’s rebound in profits over the last year. While the ratio is slightly below the industry average of 14.5, it is also well under our estimated fair "regression-based" P/E ratio of 17.6 for firms with similar financial characteristics. This means there is further room for the market to re-rate the stock if momentum picks up or growth exceeds expectations.

Explore the SWS fair ratio for Brother Industries

Result: Price-to-Earnings of 13.1 (UNDERVALUED)

However, slower revenue growth and lingering market caution could limit a swift re-rating, even if valuations appear favorable at current levels.

Find out about the key risks to this Brother Industries narrative.

Another View: What Does Our DCF Model Say?

While the price-to-earnings ratio paints Brother Industries as undervalued compared to its peers, our SWS DCF model takes a different angle by estimating the company's cash flows into the future. According to this approach, the stock trades over 48% below its calculated fair value, suggesting a larger disconnect from fundamentals than multiples alone indicate. Could there be even more upside than the market expects, or are there risks lurking under the surface?

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 Brother Industries 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 Brother Industries Narrative

If you see the numbers differently or want to dig deeper into Brother Industries’ story, you can easily craft your own analysis in just a few minutes. Do it your way

A great starting point for your Brother Industries research is our analysis highlighting 3 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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