A Look at Toho Gas (TSE:9533) Valuation Following Board-Approved Share Buyback Program

Toho Gas (TSE:9533) has unveiled a share buyback program following board approval, aiming to repurchase up to 5.31% of its outstanding shares by March 2026. This move often signals management’s optimism about long-term value.

See our latest analysis for Toho Gas.

News of the buyback comes just as momentum in Toho Gas’s shares has started to pick up after a relatively flat summer. The company’s total shareholder return for the past year stands at a healthy 14.3%, with a striking 61% gain over three years. This shows a strong long-term trajectory even as its five-year return remains negative. Clearly, investor sentiment is warming as management doubles down on capital returns.

If buybacks have you thinking about what else is on the move, it could be the perfect moment to broaden your search and discover fast growing stocks with high insider ownership

But with shares up over 60% in three years and analyst targets suggesting little room for upside, is Toho Gas still trading at a bargain? Or has the market already priced in all the potential gains ahead?

Price-to-Earnings of 14.8x: Is it justified?

Toho Gas trades on a price-to-earnings ratio of 14.8x, which appears expensive compared to both its industry rivals and what valuation models suggest is fair value for the stock.

The price-to-earnings (P/E) ratio shows how much investors are paying for each yen of current earnings. In the utilities sector, this multiple often acts as a yardstick for how optimistic the market is about a company's ability to keep delivering stable or growing profits.

With Toho Gas’s P/E significantly above both the Asian Gas Utilities industry average (13.2x) and its own fair price-to-earnings ratio estimate of just 6x, it appears that the market is currently pricing in expectations well above both its industry peers and modeled intrinsic value. If the stock were to trade closer to its fair ratio, a notable re-rating could occur.

Explore the SWS fair ratio for Toho Gas

Result: Price-to-Earnings of 14.8x (OVERVALUED)

However, slowing revenue growth and shrinking net income highlight challenges that could quickly shift sentiment if business momentum does not improve soon.

Find out about the key risks to this Toho Gas narrative.

Another View: Discounted Cash Flow Model

Looking at Toho Gas through the lens of the SWS DCF model, the story shifts. According to this approach, Toho Gas is trading above its estimated fair value of ¥2,329.76, compared to the current price of ¥4,476. This suggests potential overvaluation. Can different models agree on what the company is worth? Or do they highlight hidden risks?

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 Toho Gas 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 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 Toho Gas Narrative

If you would rather draw your own conclusions or dive deeper into the numbers, you can build a personalized view in just a few minutes. Do it your way

A great starting point for your Toho Gas research is our analysis highlighting 2 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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