Okumura Q1 earnings and what they mean for shareholders
Okumura (TSE:1833) has drawn fresh attention after first quarter earnings showed lower sales, revenue, and net income compared with a year earlier. The market is now reassessing what this updated snapshot of performance implies.
See our latest analysis for Okumura.
Okumura’s share price has softened in recent months, with a 90 day share price return of 4.37% and a year to date decline of 9.68%, even though the 1 year total shareholder return is 24.82% and the 5 year total shareholder return is 152.55%. This suggests that long term holders have still been well rewarded despite shorter term pressure following the latest earnings.
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Okumura now trades at a discount to one estimate of fair value, while the latest earnings show softer sales and profit. Is the current caution in the share price justified, or has the stock been marked down too far?
Price-to-earnings of 11.3x for Okumura: Is it justified?
On the latest figures, Okumura trades on a P/E of 11.3x at a share price of ¥5,690. That sits above both peer and industry averages, so the valuation is not especially cheap on this measure.
The P/E ratio compares Okumura’s share price with its earnings per share and is a common way to judge what investors are paying for current profits. For a construction company with cyclical earnings, a higher P/E can imply that the market is comfortable paying more today for each unit of profit.
Here, Okumura is described as expensive relative to the peer average P/E of 10.2x and the broader JP Construction industry average of 11x. This suggests investors are willing to pay a premium to the sector, even though earnings quality includes large one off items and the company’s 1 year return has lagged both the industry and the wider JP market over the same period.
Result: Price-to-earnings of 11.3x (OVERVALUED)
See what the numbers say about this price — find out in our valuation breakdown.
However, Okumura’s softer recent share price performance and reliance on construction and civil engineering activity could quickly challenge the current valuation premium if project demand weakens.
Find out about the key risks to this Okumura narrative.
Another view on Okumura’s valuation
While the current P/E of 11.3x makes Okumura look expensive against peers, the SWS DCF model points to a different issue. At a share price of ¥5,690, the stock trades above an estimated future cash flow value of ¥4,413.81, which implies limited room for error if expectations disappoint.
For investors who want to see how this cash flow view is built step by step, 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 Okumura 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 23 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
If the mixed signals around Okumura leave you unsure, it helps to look at the data yourself and decide quickly where you stand. A good place to start is by weighing 2 key rewards and 3 important warning signs
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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.
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