Kyushu Electric Power (TSE:9508): How Does Its Valuation Stack Up After Raising Profit Guidance?

Kyushu Electric Power Company (TSE:9508) lifted its annual profit outlook after experiencing stronger demand this summer and adjustments to its fuel cost system. The company shared the revised guidance along with steady dividend plans.

See our latest analysis for Kyushu Electric Power Company.

Kyushu Electric Power Company’s latest profit upgrade and steady dividend policy have caught investors’ attention, with momentum building as the stock has delivered an 11% year-to-date share price return. Although there was a slight dip in the past year’s total shareholder return, the stock’s three- and five-year total shareholder returns reflect strong longer-term performance. Recent upgrades and resilient operations signal renewed confidence from the market.

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With its recent profit upgrade and a stock price still trading at a notable discount to analyst targets, the question now is whether Kyushu Electric Power Company offers investors a real buying opportunity or if expectations for growth are already reflected in the current valuation.

Price-to-Earnings of 4.3x: Is it justified?

Kyushu Electric Power Company is currently valued at a price-to-earnings (P/E) ratio of just 4.3x, which is notably below both its industry and peer averages. This makes it appear attractively priced relative to earnings.

The price-to-earnings ratio is a key measure in the utilities sector. It reflects how much investors are willing to pay today for a unit of the company’s earnings. For Kyushu Electric Power Company, the current P/E signals that the market is assigning a relatively low valuation for each yen of earnings, even as the company posts strong profit growth.

This low multiple implies the market may be skeptical that recent earnings growth will be sustained, or is underestimating the company's ability to maintain profitability. Compared to the Asian electric utilities industry average of 16.4x and the peer average of 4.5x, Kyushu Electric Power Company is trading at a compelling discount. The P/E also sits well below the estimated fair P/E ratio of 7.5x, suggesting significant potential room for price appreciation if the market re-rates the business based on its earnings quality.

Explore the SWS fair ratio for Kyushu Electric Power Company

Result: Price-to-Earnings of 4.3x (UNDERVALUED)

However, investor optimism could be tested if recent earnings momentum fades or if persistent revenue declines overshadow the current valuation discount.

Find out about the key risks to this Kyushu Electric Power Company narrative.

Another View: Discounted Cash Flow Signals a Different Story

While the price-to-earnings approach points to undervaluation, our DCF model tells a more cautious tale. According to this method, Kyushu Electric Power Company’s current share price of ¥1,572 is actually above its estimated fair value of ¥1,333.53. This suggests shares may be a little ahead of themselves. So, which view should win out?

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 Kyushu Electric Power Company 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 866 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 Kyushu Electric Power Company Narrative

If you want to take a hands-on approach with the numbers and trends highlighted here, you can easily build your own perspective in just a few minutes. Do it your way

A great starting point for your Kyushu Electric Power Company research is our analysis highlighting 3 key rewards and 3 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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