Rakuten Bank (TSE:5838) has drawn fresh attention after recent share price moves left the stock down about 5% over the past month while still showing a gain of roughly 22% in the past 3 months.
Short term momentum for Rakuten Bank looks softer, with the share price down about 5% over the past month and weaker year to date, yet the 3 year total shareholder return of roughly 152% points to a very strong longer term journey.
Scan beyond the recent swings in Rakuten Bank and size up other potential opportunities with our hand picked list of 18 high quality undervalued stocks that pair solid cash flows with sturdier balance sheets.
Rakuten Bank trades at a sizeable discount to one estimate of intrinsic value and sits below analyst targets, yet the recent pullback hints at market unease. Do the numbers justify that caution?
Preferred P/E of 14.7x for Rakuten Bank: Is it justified?
On simple earnings math, Rakuten Bank trades on a P/E of 14.7x, which screens as inexpensive relative to both its own fair P/E of 19.2x and a peer average of 15.6x, even after the recent share price pullback to ¥6,141.
The P/E ratio compares the current share price with earnings per share and gives a rough sense of how much investors are paying for each unit of profit. For a lender like Rakuten Bank, this metric often reflects how the market weighs its growth profile, earnings quality and perceived risk against other banks.
Here, the business is described as offering high quality earnings, with profit growth of 43.9% over the past year and a 5 year earnings growth rate of 31.6% per year. Against that backdrop, a 14.7x P/E that sits below the estimated fair P/E of 19.2x and below the JP Banks industry average of 15.6x suggests the market is pricing the stock more cautiously than the earnings track record alone might imply. This also indicates that there may be scope for the valuation multiple to move closer to that fair level if sentiment improves.
Explore the SWS fair ratio for Rakuten Bank.
Result: Preferred multiple of Price-to-Earnings of 14.7x (UNDERVALUED)
Still, Rakuten Bank faces clear risks if loan quality weakens or if digital competitors squeeze fees, which could pressure earnings and keep the P/E multiple subdued.
Find out about the key risks to this Rakuten Bank narrative.
Another view on Rakuten Bank’s value
From a different perspective, the SWS DCF model values Rakuten Bank at about ¥10,675.57 per share, compared with the recent price near ¥6,141. That gap suggests the stock trades at a sizeable discount on cash flow assumptions. Which signal may deserve more weight in your process?
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 Rakuten Bank 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 18 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
Curious whether the tone around Rakuten Bank so far feels too cautious or not cautious enough? Move quickly, look through the numbers yourself and stress test the assumptions that matter most to you, then round out that view with the 4 key rewards.
Looking for more investment ideas beyond Rakuten Bank?
If Rakuten Bank has sharpened your focus, do not stop here. Broaden your watchlist with other ideas that match your risk comfort and return goals.
- Spot potential mispricings early and scan a curated 75 high quality undiscovered gems that could otherwise sit off most investors' radar.
- Prioritise resilience and review a 21 resilient stocks with low risk scores that tilts toward businesses with steadier profiles and fewer red flags.
- Hunt for stronger balance sheets and compare companies in a list of solid balance sheet and fundamentals (21 results) that pair financial strength with underlying fundamentals.
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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