Blog

DIC (TSE:4631) shares have shown some steady gains recently, with the stock climbing over 3% in the past week. Investors seem to be taking a closer look as the company’s returns have outpaced the broader market this month.

See our latest analysis for DIC.

Momentum appears to be building for DIC, with its share price up 24.8% over the past quarter and a strong 17.7% one-year total shareholder return, reinforcing long-term confidence. Recent price gains suggest investors are warming up to its growth story and shifting risk outlook.

If DIC’s recent gains have sparked your curiosity, this could be the perfect moment to discover fast growing stocks with high insider ownership.

But is DIC still undervalued compared to its potential, or are these recent gains a sign that investors have already priced in the company’s future? There may still be a buying opportunity to consider.

DIC is currently trading at a price-to-earnings (P/E) ratio of 12.5x, which puts the stock below industry and peer averages based on the last close of ¥3,700. This suggests the market is discounting the company’s earning power compared to similar businesses.

The P/E multiple reflects how much investors are willing to pay for a yen of earnings, making it a key benchmark for mature businesses like DIC. In this case, the relatively low P/E could indicate undervaluation, especially since recent profitability has improved after a challenging period.

Significantly, DIC’s P/E of 12.5x is well under both the peer average of 23x and the JP Chemicals industry standard of 13.3x. This further highlights a value gap in the company’s shares. Compared to our estimated fair P/E of 14.8x, this valuation could move higher if market sentiment turns more optimistic.

Explore the SWS fair ratio for DIC

Result: Price-to-Earnings of 12.5x (UNDERVALUED)

However, sluggish annual revenue growth and a still modest net income margin may pressure DIC’s valuation if market sentiment reverses unexpectedly.

Find out about the key risks to this DIC narrative.

To challenge the low price-to-earnings perspective, let’s look at valuation from another angle. The SWS DCF model suggests DIC’s shares are trading 23% below our estimate of their fair value. This reinforces the sense of a potential opportunity, but also raises the question: is the market missing something, or is there a reason for caution?

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 DIC 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.

If you like to question the consensus or want to explore the numbers on your own, you can craft your personal view just as quickly. Do it your way

A great starting point for your DIC research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

There’s a world of smart opportunities beyond DIC. See what other investors are finding. These handpicked ideas could give your portfolio the edge you need.

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.

Companies discussed in this article include 4631.T.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Weiterlesen