Assessing Tokyo Gas After 44% Rally and Renewables Push in 2025

• Wondering if Tokyo GasLtd is fairly priced, or if the market is missing something? You’re in the right place for a deeper dive into its true value.

• Shares have been on a strong run lately, with an 18.9% jump over the past month and an impressive 44.4% rally so far this year. This hints at changing growth expectations and risk appetite.

• Recent news has highlighted the company’s strategic investments in renewable energy and its push towards decarbonization. Both factors are helping drive renewed investor interest. These developments have provided fresh context for the stock’s upward momentum as Tokyo GasLtd adapts to evolving energy trends in Japan.

• But does the current price reflect the fundamentals? Based on a valuation score of 2 out of 6, there is more to uncover. Not just by the numbers, but by exploring smarter ways to value stocks. Stay tuned for a practical walkthrough and a different approach later in the article.

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

A Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows and discounting them back to today’s value. This approach provides a grounded sense of what the business is really worth, based on its ability to generate cash in the years ahead.

For Tokyo GasLtd, the most recent Free Cash Flow reported is approximately ¥146.3 billion. Analyst estimates predict some fluctuation over the next decade, with projected Free Cash Flow for the year ending March 2030 around ¥78.4 billion. It is important to note that while detailed analyst forecasts typically only reach five years, later projections are extrapolated based on recent trends.

According to the DCF model, this steady outlook leads to an estimated intrinsic value of ¥5,370 per share. Currently, the stock is trading at a level that is 17.9% above this calculated fair value. This suggests that Tokyo GasLtd is trading at a noticeable premium relative to its underlying cash flow generation potential.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Tokyo GasLtd may be overvalued by 17.9%. Discover 913 undervalued stocks or create your own screener to find better value opportunities.

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

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies like Tokyo GasLtd because it ties a company’s share price directly to its current ability to generate profits. For investors, the PE ratio provides a clear picture of how much the market is willing to pay for each yen of earnings, making it a practical gauge for relative valuation.

Growth expectations and perceived risks play a big role in determining what is considered a “normal” or “fair” PE ratio. Companies expected to grow faster or those operating in lower-risk environments may justify higher PE multiples, while slower growth or higher risk can bring the ratio down below sector norms.

At present, Tokyo GasLtd is trading at a PE ratio of 11.6x. This is below both the industry average for Gas Utilities of 14.4x and the peer group average of 16.3x, suggesting the market is more cautious than the broader sector or Tokyo GasLtd’s direct competitors.

Simply Wall St’s proprietary “Fair Ratio” offers a more tailored benchmark, blending factors such as Tokyo GasLtd’s profit margins, growth profile, market cap, risk exposures, and its industry context. This customized ratio, 7.4x for Tokyo GasLtd, provides a deeper, company-specific gauge of value than standard industry averages or peer comparisons, which can miss nuance around a company’s individual prospects and risks.

Since the market PE ratio of 11.6x is notably higher than the Fair Ratio of 7.4x, Tokyo GasLtd appears overvalued by this measure, even though it seems less expensive than other peers and its industry on traditional multiples.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1437 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a simple, approachable way for investors to describe their perspective on a company like Tokyo GasLtd, providing the story behind their numbers by sharing assumptions about fair value, future revenue, earnings, and margins.

Narratives connect each investor’s story to a specific financial forecast, turning personal insights into a calculated fair value and actionable investment view.

Using Simply Wall St’s Community page, millions of investors can easily access, create, and compare Narratives, making it simple to see how different viewpoints influence when to buy or sell, especially by comparing each Narrative’s Fair Value to the current Price.

Narratives are dynamic and instantly update with new information such as news or earnings releases, so your valuation story is always current.

For example, among Tokyo GasLtd Narratives, some investors are optimistic and estimate a much higher future fair value based on strong growth in renewables, while others take a more cautious stance and see a much lower fair value.

Do you think there’s more to the story for Tokyo GasLtd? Head over to our Community to see what others are saying!

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 9531.T.

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