Furuno Electric (TSE:6814): Reassessing Valuation Following Upgraded Earnings Outlook and Dividend Review Plans

Furuno Electric (TSE:6814) is back in the spotlight after raising its consolidated earnings guidance and revealing plans to review dividend increases at its upcoming board meeting. These updates highlight positive momentum across key parts of the business.

See our latest analysis for Furuno Electric.

After an impressive string of updates, Furuno Electric’s momentum is hard to miss. The 30-day share price return of 34.07% highlights renewed investor confidence following its upgraded earnings outlook. The staggering 350.78% 1-year total shareholder return underscores a longer-term surge.

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With shares already soaring on stronger earnings and potential dividend hikes, the question now is whether Furuno Electric remains undervalued or if the market has already accounted for the company’s future growth prospects.

Price-to-Earnings of 14x: Is it justified?

Furuno Electric is currently trading at a price-to-earnings (P/E) ratio of 14x, pricing its shares slightly below the average peer group and close to the sector average. At a last close of ¥7,320, the market appears to be weighing recent gains against future earnings expectations.

The price-to-earnings ratio tells investors how much they are paying for each yen of Furuno's annual earnings. For technology companies like Furuno, this multiple often reflects industry growth potential and earnings stability.

At 14x earnings, Furuno is considered good value compared to the JP Electronic industry average (14.3x) and peer average (18.5x). However, this multiple is above its estimated fair price-to-earnings ratio of 12.1x. This might limit further near-term upside if market sentiment weakens. The fair ratio signals a level the market could potentially move toward if fundamentals do not shift.

Explore the SWS fair ratio for Furuno Electric

Result: Price-to-Earnings of 14x (ABOUT RIGHT)

However, risk factors such as slowing annual net income growth and shares trading above analyst targets could pose challenges to Furuno Electric's ongoing momentum.

Find out about the key risks to this Furuno Electric narrative.

Another View: SWS DCF Model Shows a Much Lower Price

While Furuno Electric’s price-to-earnings ratio suggests shares are slightly above fair value, our DCF model points to a different picture. The SWS DCF model estimates Furuno’s fair value at ¥28,475.71, which is well above the current market price. This suggests shares could be significantly undervalued. Does the market see risks the model does not, or is there a bargain hiding in plain sight?

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 Furuno Electric 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 Furuno Electric Narrative

If you want to take a hands-on approach or have a different interpretation of Furuno Electric’s outlook, you can quickly build your own narrative in just a few minutes. Do it your way

A great starting point for your Furuno Electric research is our analysis highlighting 2 key rewards and 2 important warning signs 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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