Fanuc (TSE:6954) just jumped nearly 13% after unveiling a collaboration with Nvidia to build industrial robots powered by physical AI, a move that immediately sharpened investor focus on its long term growth story.
See our latest analysis for Fanuc.
That surge has come on top of already strong momentum, with a 7 day share price return of 18.0% and a 90 day share price return of 44.3%. The 1 year total shareholder return of 52.4% signals investors are steadily warming to Fanuc as physical AI moves from concept to commercial reality.
If this kind of AI driven robotics story has your attention, it could be a good moment to explore other high growth tech and AI names through high growth tech and AI stocks.
But after such a sharp rerating and a share price now sitting above the average analyst target, is Fanuc still trading below its long term potential, or is the market already baking in years of physical AI growth?
Fanuc last closed at ¥5,931, and its current valuation implies a rich price-to-earnings multiple of 35.2x, well above most Machinery peers.
The price-to-earnings ratio compares what investors pay today with the company’s current earnings. It is a key yardstick for mature, profitable industrial names like Fanuc. A higher multiple usually signals that the market expects stronger or more resilient earnings than the average company in the same sector.
In Fanuc’s case, earnings have grown faster than the broader Machinery industry over the past year and have compounded at roughly mid single digits over five years, with margins improving and earnings quality described as high. However, that earnings profile sits against forecasts for only mid single digit annual profit growth and a return on equity that is expected to remain in single digits, which is modest relative to what such an elevated multiple would normally imply. At the same time, our SWS DCF model flags that the current ¥5,931 share price is trading well above an estimated fair value of ¥3,707.35, indicating a substantial premium to the cash flows implied by those growth expectations.
Compared to the Japanese Machinery industry average P/E of 12.6x and a peer average of 24x, Fanuc’s 35.2x stands out as significantly higher, suggesting investors are paying a steep premium for its role in physical AI and industrial automation. Versus an estimated fair price-to-earnings ratio of 25.2x, the current market multiple also sits notably above the level our fair ratio work indicates the stock could gravitate toward over time if sentiment or growth expectations cool.