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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?

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 SCSK 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 876 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.

Don’t just take these numbers at face value. If you have your own angle or want to dig deeper, you can craft your perspective in just a few minutes with Do it your way.

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

Smart investors are always on the lookout for opportunities others might overlook. You could be missing the next big winner if you don’t take action now.

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 9719.T.

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