Murata Manufacturing (TSE:6981): Evaluating Valuation After New High‑Voltage MLCC for SiC Power Electronics

Murata Manufacturing (TSE:6981) just rolled out mass production of a new high voltage multilayer ceramic capacitor designed for silicon carbide based power systems, a quiet but meaningful development for its EV and high performance electronics exposure.

See our latest analysis for Murata Manufacturing.

That focus on next generation power components seems to be resonating with investors, with a strong 35.14% 3 month share price return and a solid 34.37% 1 year total shareholder return, suggesting momentum is building rather than fading.

If Murata's EV and power electronics push has caught your eye, this is also a good moment to explore other high growth tech and AI stocks that could be riding similar secular trends.

Yet with earnings growing, new SiC focused products ramping and the share price already up over 30% in a year, the key question is whether Murata still offers upside or if markets are already pricing in future growth.

Price-to-Earnings of 25.6x: Is it justified?

Murata trades on a 25.6x price-to-earnings multiple, below peers yet above the wider Japanese electronics industry, which hints at a quality premium in the share price.

The price-to-earnings ratio compares the current share price to the company’s earnings per share, making it a shorthand for how much investors are willing to pay for each unit of profit. For a diversified components maker like Murata, this is particularly relevant because earnings reflect both cyclical demand and the success of higher margin innovations such as advanced capacitors and power modules.

Against its closest peers, Murata looks attractively priced, with its 25.6x earnings multiple sitting well below the 41.9x peer average. This suggests the market is not fully pricing in its recent 26.8% earnings growth and improving 13.4% net profit margins. However, when compared with the broader JP Electronic industry average of 14.4x, the stock trades at a sizeable premium, which implies investors are already paying up for its stronger growth profile and forecast profit expansion of 12.9% per year, even as current and forecast return on equity remain in the high single to low double digits.

Relative to our estimated fair price-to-earnings ratio of 25.3x, the current 25.6x multiple is only marginally higher. This indicates the valuation could drift toward that fair level as fundamentals and sentiment evolve rather than requiring a major re-rating in either direction.

Explore the SWS fair ratio for Murata Manufacturing

Result: Price-to-Earnings of 25.6x (ABOUT RIGHT)

However, sustained margin gains could prove elusive if EV demand underwhelms or if rival capacitor makers accelerate SiC investments, which could compress Murata's pricing power.

Find out about the key risks to this Murata Manufacturing narrative.

Another View: Our DCF Signals Deeper Value

While the 25.6x earnings multiple suggests Murata is roughly fairly priced, our DCF model paints a more optimistic picture, indicating the shares trade about 12.5% below fair value at roughly ¥3,787. That gap hints at a cushion, but is it enough to justify fresh buying after such a strong run?

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 Murata Manufacturing 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 930 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 Murata Manufacturing Narrative

If you see the numbers differently or want to stress test your own thesis, you can easily build a personalised view in minutes: Do it your way.

A great starting point for your Murata Manufacturing research is our analysis highlighting 4 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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