Hokkaido Electric Power (TSE:9509): Valuation Insights Following Upgraded Earnings Guidance and Dividend Hike

Hokkaido Electric Power Company (TSE:9509) just updated its outlook for the fiscal year ending March 2026 and raised its second quarter dividend. The new guidance and dividend hike may catch investor attention for good reason.

See our latest analysis for Hokkaido Electric Power Company.

After a strong start to the year, Hokkaido Electric Power Company's shares have cooled off somewhat in recent weeks, reflecting a 23.1% year-to-date share price return but giving back some momentum with short-term dips. Still, investors who have stuck with the company over the longer haul have seen impressive total shareholder returns of 143% over three years and 178% over five years. This suggests that, while the headlines are fresh, the underlying story is one of steady and substantial progress.

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With expectations rising and shares pausing after a major run-up, the key question is whether Hokkaido Electric Power is now trading at a bargain or if the market already reflects all its future growth potential.

Price-to-Earnings of 3.7x: Is it justified?

With Hokkaido Electric Power Company trading at a price-to-earnings ratio of 3.7x, investors might wonder if the stock is attractively valued or trading at a premium compared to peers and the broader Japanese market.

The price-to-earnings (P/E) ratio represents how much investors are willing to pay for each yen of company's earnings. In utilities, where earnings are often stable and predictable, the P/E ratio is an important gauge of investor sentiment and future growth expectations.

Compared to the Japanese market average P/E of 14.3x, Hokkaido Electric Power Company appears significantly undervalued. This suggests the market may be discounting muted growth or potential risks. When compared with other Asian electric utilities, which have an average P/E of 17.1x, the company's valuation stands out as even more attractive. Its P/E ratio is also well below our estimated fair P/E of 9.3x, which could imply room for a valuation re-rating should market conditions improve.

Explore the SWS fair ratio for Hokkaido Electric Power Company

Result: Price-to-Earnings of 3.7x (UNDERVALUED)

However, investors should note stalled revenue growth and recent share price volatility. These factors could challenge the company's valuation story in the months ahead.

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

Another View: What Does Our DCF Model Say?

Looking at Hokkaido Electric Power Company through the lens of our DCF model, the story takes a different turn. The SWS DCF model suggests that the current price of ¥1019 is actually above its estimated fair value of ¥879.46. This signals the shares could be overvalued from a long-term cash flow perspective. Is recent market optimism clouding underlying fundamentals?

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 860 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 see things differently or want to analyze the numbers on your own terms, you can run your own scenario in just minutes and Do it your way.

A great starting point for your Hokkaido 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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