A Look at Hokkaido Electric Power (TSE:9509) Valuation as Tomari Nuclear Restart Gains Traction

Hokkaido Electric Power Company (TSE:9509) is back in focus as the possibility of restarting its Tomari nuclear power plant gains traction. The Nuclear Regulation Authority recently approved the safety review for the No. 3 reactor, which moves the company closer to resuming operations.

See our latest analysis for Hokkaido Electric Power Company.

The news around Tomari’s potential restart has helped fuel a surge in Hokkaido Electric’s momentum, with a 13.4% share price return in the past month and a massive 45.7% total shareholder return over the last year. Confidence in further nuclear operations and safety upgrades appears to have shifted investor sentiment firmly in a positive direction, and the long-term trend continues to show strength.

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With the rally in its share price and investor optimism running high, the question now is whether Hokkaido Electric Power Company’s upside has already been realized, or if the current momentum signals a genuine buying opportunity that the market has yet to fully price in.

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

Hokkaido Electric Power Company is currently trading with a price-to-earnings (P/E) ratio of 4.3x, suggesting the market is assigning a relatively low multiple to its recent earnings despite the stock’s strong performance.

The price-to-earnings ratio indicates how much investors are willing to pay today for each yen of earnings generated by the company. In the context of the Japanese electric utilities sector, this metric also reflects investor confidence in future profit stability and growth.

Compared to its peers, Hokkaido Electric’s P/E is notably undervalued. The company trades far below the industry average of 15.9x for Asian electric utilities and also sits well beneath the Japanese market average of 14.1x. In addition, the current ratio is less than half of its estimated fair P/E of 9.4x, a level that the market could eventually move toward if expectations for earnings growth or stability increase.

Explore the SWS fair ratio for Hokkaido Electric Power Company

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

However, political shifts or delays in reactor restarts could dampen sentiment and slow the momentum seen in Hokkaido Electric Power Company’s recent rally.

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

Another View: Discounted Cash Flow Tells a Different Story

While the current price-to-earnings ratio suggests Hokkaido Electric Power Company is significantly undervalued, a look through our DCF model presents a different outcome. According to the SWS DCF model, the stock is actually trading above its fair value estimate. This contrast raises an important question: Is the market getting ahead of itself based on recent momentum, or is the DCF model missing the mark on future prospects?

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 Hokkaido 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 920 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 Hokkaido Electric Power Company Narrative

If you have a different perspective or want to dig deeper into the details, you can craft your own analysis in just a few minutes. Do it your way

A great starting point for your Hokkaido Electric Power Company research is our analysis highlighting 2 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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