Is Tokyo Gas Still Attractive After Recent 8% Share Price Slip in 2025?

If you are eyeing Tokyo GasLtd and wondering what your next move should be, you are not alone. This is one of those stocks that always seems to generate debate, especially as it continues to make big swings on the charts. Over the last year, shares have surged an impressive 62.9%. If you zoom out to the three- and five-year returns, gains of 129.2% and 139.1% tell the story of long-term momentum. Even the 21.3% jump year-to-date stands out in a cautious market. Still, not everything has been smooth sailing. Over the past month, the stock is down 8.5%, following a similar 8.0% slide in just the last week. This recent pullback reflects both profit-taking after big gains and some shifting perceptions around the Japanese energy sector, as investors weigh supply chain shifts and regulatory developments that could create new risks or opportunities down the line.

With Tokyo GasLtd showing a mix of impressive returns and fresh volatility, it is no wonder everyone is asking whether the stock is still a good value at its current price of 5,320. Smart investors have good reason to look closely at valuation, and by most measures, the company scores a 2 out of 6 on our value checklist. This suggests some, but not widespread, undervaluation. The question gets more interesting: Which methods matter most, and can we find a deeper take on what Tokyo GasLtd is really worth? That is exactly what we are about to break down. Let us dig into how different valuation approaches stack up and why there might be an even better way to gauge the company’s real potential.

Tokyo GasLtd scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Tokyo GasLtd Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is widely used for estimating a company’s intrinsic worth by projecting its future cash flows and discounting them back to today’s value. For Tokyo GasLtd, this process involves evaluating the money the company is expected to generate and considering what those amounts are worth right now, taking into account risks and growth expectations for the years ahead.

Currently, Tokyo GasLtd reports a trailing twelve-month free cash flow of ¥147.6 billion. Analyst estimates indicate that free cash flow will change over the coming decade, with a projection of ¥30.6 billion in 2030. Notably, only the next five years of forecasts come directly from analysts, while figures for later years are based on Simply Wall St’s internal models. The DCF analysis incorporates all these projected amounts to determine its estimate.

Based on this model, Tokyo GasLtd’s fair value is calculated at ¥1,643 per share. With the shares trading at ¥5,320, the model suggests the company is trading at a 223.7% premium to its intrinsic value. This sizeable gap indicates the stock is substantially overvalued under the DCF scenario.

Result: OVERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Tokyo GasLtd may be overvalued by 223.7%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Tokyo GasLtd Price vs Earnings

The Price-to-Earnings (PE) ratio is a popular way to value profitable companies, as it links the current share price to the company’s earnings, offering a snapshot of how much investors are willing to pay for each yen of profit. This makes it an effective tool for comparing similar companies where profitability is solid and consistent.

It is important to note that what constitutes a "normal" PE ratio will depend on expectations for growth and risk. Companies expected to grow faster or with less risk typically command higher PE multiples, while lower growth or greater uncertainty can limit them.

Tokyo GasLtd currently trades at a PE ratio of 11.7x. This is below the Gas Utilities industry average of 13.2x, and well under the peer group average of 15.1x. This suggests it might be undervalued compared to similar firms. However, Simply Wall St’s proprietary “Fair Ratio,” which blends key factors like Tokyo GasLtd’s growth prospects, profit margins, industry, market cap and risks, stands at 8.0x. This custom metric moves beyond basic comparisons and provides a more tailored benchmark for what Tokyo GasLtd should be worth based on its unique profile.

Since Tokyo GasLtd’s actual PE ratio of 11.7x is notably higher than its Fair Ratio of 8.0x, this method points to the share price being somewhat overvalued relative to the company’s fundamentals and outlook.

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 Tokyo GasLtd Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is simply your story about a company; it connects your expectations for future revenue, profits, and margins to a fair value estimate, all based on your own assumptions. Narratives put the power in your hands by letting you link Tokyo GasLtd’s numbers to its story, making complex analysis both accessible and personalized.

Using Narratives on Simply Wall St’s Community page, millions of investors can easily visualize how their specific outlook for Tokyo GasLtd translates into a modeled fair value and then compare it to the current share price to make more informed buy or sell decisions. Narratives automatically update as new data or news emerges, so your viewpoint is always current. For example, some Tokyo GasLtd investors might see an optimistic fair value as high as ¥6,000, while others, focused on risks, may place it closer to ¥1,600. Narratives make it easy to see exactly how different perspectives play out, so you can invest with confidence and clarity.

Do you think there's more to the story for Tokyo GasLtd? 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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