SCSK (TSE:9719) has recently seen its stock price gain momentum over the past month, climbing nearly 29%. That kind of movement often gets investors wondering what is driving the action and how the company stacks up after such a run.
See our latest analysis for SCSK.
SCSK’s share price has soared in recent weeks, building on strong momentum and capturing investors’ attention. With a 29% climb over the past month and a stellar 92% total shareholder return for the year, sentiment is upbeat and signals of growth potential are hard to miss, even as the broader market has been more subdued.
If you’re curious where else you might find this kind of momentum, it’s a great time to broaden your horizons and discover fast growing stocks with high insider ownership
But with the stock now trading well above analyst targets and following a strong rally, the big question remains: Is there still value left for new buyers, or has the market already priced in SCSK’s future growth?
SCSK is currently trading at a price-to-earnings (P/E) ratio of 28.9x, which makes it look expensive compared to both industry peers and its estimated fair valuation. The last close price stood at ¥5,677, while industry and fair P/E benchmarks are notably lower.
The P/E ratio measures how much investors are willing to pay today for each yen of earnings generated by the company. For technology and IT services firms in Japan, the P/E is often used to gauge future profit expectations, reward for growth, and sector sentiment.
A P/E of 28.9x is sharply higher than the JP IT industry average of 17.1x. This suggests that the market is pricing in robust growth or superior business quality. However, SCSK also trades above its peer average of 25.9x and its own fair P/E of 28x. This means expectations might have run a little hot. If the market regains balance, SCSK’s valuation could shift toward this fair level.
Explore the SWS fair ratio for SCSK
Result: Price-to-Earnings of 28.9x (OVERVALUED)
However, slowing revenue and profit growth, combined with the stock’s premium valuation, could limit further upside if market expectations shift.
Find out about the key risks to this SCSK narrative.
Looking at SCSK from another angle, our DCF model estimates its fair value at ¥3,820.56. This is well below the current market price of ¥5,677. This approach suggests the stock may be overvalued, challenging the idea that high growth fully justifies today’s valuation. Could this signal caution for new investors?