Can Keyence’s Valuation Be Justified After Recent Slide in 2025?

If you are trying to make sense of where Keyence stock goes from here, you are definitely not alone. After all, the stock has been on quite a journey lately. In the past week, shares dipped by 0.8%, just a small blip, but zooming out shows a bit more of the picture. Over the past month, Keyence clawed back a modest gain of 1.4%, but year-to-date is still down by 11.0%. Stretch your view to a year, and that loss widens to 14.4%. However, if you have been holding for the long term, you are still in positive territory, up more than 23% over five years.

So, what explains these moves? Some of it comes down to how the broader market is treating growth-focused tech and automation companies like Keyence, reacting to shifting economic signals. While there have not been dramatic headlines driving every move, investor sentiment about global manufacturing demand and digitization has played a role in both the dips and the periods of relief. In short, investors have been flipping between optimism about structural opportunities and caution regarding valuations and potential risks.

Right now, Keyence receives a value score of just 1 out of 6, indicating it is undervalued in only one of six valuation checks. That does not mean there is no opportunity here, but it does suggest the stock might not be screamingly cheap based on the usual metrics.

Up next, let’s break down exactly what goes into that valuation score and what each method really says about Keyence. There is also a smarter, more nuanced way to look at valuation that could matter even more.

Keyence scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Keyence Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is a classic approach used to estimate the value of a company by projecting its future cash flows and discounting them back to today’s value. This helps investors gauge what a business is fundamentally worth, regardless of current market sentiment.

For Keyence, the most recent Free Cash Flow reported was ¥386.3 billion. Over the next ten years, analyst estimates combined with proprietary projections anticipate steady growth, with Free Cash Flow expected to reach around ¥507.5 billion in 2030. While analysts typically provide forecasts up to five years, projections beyond that are based on Simply Wall St’s extrapolations.

Factoring in these projections, the DCF model arrives at an intrinsic value of ¥35,844 per share. In comparison with Keyence's current share price, this implies the stock is trading at a 56.8% premium to its calculated intrinsic value. In other words, the DCF suggests Keyence is significantly overvalued at today’s market price.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Keyence.

Our Discounted Cash Flow (DCF) analysis suggests Keyence may be overvalued by 56.8%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Keyence Price vs Earnings (PE Ratio Analysis)

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies, as it directly relates a company’s share price to its earnings per share. This makes it especially relevant for a business like Keyence that consistently earns solid profits.

Not all PE ratios are created equal. Higher growth rates can justify higher PE multiples, while increased risks or weaker margins generally mean a lower “normal” PE is prudent. For Keyence, the current PE ratio stands at 34.3x, which is noticeably higher than the Electronic industry average of 14.3x, and even above its direct peer group averaging 18.0x.

To provide deeper insight, Simply Wall St uses a “Fair Ratio,” a proprietary multiple tailored to each company’s specific circumstances. This approach goes further than simply comparing with peers or industry averages because it incorporates factors like earnings growth, profit margin, market cap, risk profile, and industry characteristics. For Keyence, the Fair PE ratio is estimated at 22.9x, reflecting those company-specific strengths and headwinds.

Comparing Keyence’s current 34.3x to its Fair Ratio of 22.9x, the stock appears to be trading at a premium well above what would be considered justified, even after accounting for all its positive attributes.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose Your Keyence Narrative

Earlier, we mentioned that there is an even better way to think about valuation, so let's introduce you to Narratives. A Narrative lets you create a personalized story about a company, combining your unique outlook with assumptions about fair value, future revenue, earnings, and margins. Instead of just looking at numbers in isolation, a Narrative connects Keyence’s business story to financial forecasts and flows directly to what you see as a fair price.

This is the core of Simply Wall St’s Narratives tool, found on the Community page and used by millions of investors. Narratives help you quickly see whether you think Keyence’s current price is a buy, sell, or hold, based on your own view of fair value. They also update automatically when fresh news or new earnings arrive. For example, one investor might see Keyence’s fair value at ¥50,000 per share, while another sets it at ¥28,000, reflecting their own assumptions and stories about the company's future.

With Narratives, you are equipped with a simple, dynamic way to make smarter investment decisions, anchored in both data and your personal perspective.

Do you think there's more to the story for Keyence? Create your own Narrative to let the Community know!

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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