A Look At UBE Corporation (TSE:4208) Valuation After Kiln Closure And Recycling Shift

UBE (TSE:4208) has drawn investor attention after its board approved plans to shut the kiln at Kanda District 2 of its Kyushu Plant by March 2027 and convert the site into a recycling promotion center.

See our latest analysis for UBE.

The kiln closure plan comes after a period of firm share price momentum for UBE, with the 90 day share price return of 14.62% and 1 year total shareholder return of 13.86% pointing to gradually improving sentiment rather than a sudden re rating.

If this kind of repositioning has your attention, it can also be a good moment to scan fast growing stocks with high insider ownership as you think about what else belongs on your watchlist.

So, with UBE’s shares posting solid multi year returns, annual revenue growth at a 0.78% decline and net income growth at 17.17%, plus only a small 4% gap to the ¥2,720 price target, is there still a buying opportunity here, or has the market already priced in future growth?

Price-to-Earnings of 44.1x: Is it justified?

On the latest figures, UBE trades on a P/E of 44.1x, which sits against a last close of ¥2,610.5 and points to a rich earnings multiple compared with peers.

The P/E ratio compares the share price to earnings per share, so for a company like UBE it reflects what the market is willing to pay for each unit of current earnings.

With earnings forecast to grow at 17.2% per year compared with 8.5% for the broader JP market, the current multiple indicates that investors are already paying a premium for that faster profit outlook, despite weaker recent profit margins, a large one off loss and a Return on Equity of 0.4% that is described as low.

The premium is also steep when set against the JP Chemicals industry average P/E of 13x, the peer average of 14.3x and an estimated fair P/E of 17.2x. This suggests a level the market could potentially trend toward if expectations cool.

Explore the SWS fair ratio for UBE

Result: Price-to-Earnings of 44.1x (OVERVALUED)

However, you still have to weigh a rich 44.1x P/E against a low 0.4% Return on Equity and an intrinsic value estimate that sits well below the current share price.

Find out about the key risks to this UBE narrative.

Another View: Our DCF Suggests A Different Story

While the 44.1x P/E hints at a rich market price, our DCF model paints an even starker picture. With an estimate of fair value at ¥1,643.43 versus a current price of ¥2,610.5, UBE screens as overvalued on this approach as well. So where does that leave you if sentiment cools?

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 UBE 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 882 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.

Build Your Own UBE Narrative

If you see the numbers differently, or prefer to test your own assumptions, you can create a new UBE view in minutes by starting with Do it your way.

A great starting point for your UBE research is our analysis highlighting 1 key reward and 4 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If UBE has you thinking about what else belongs in your portfolio, this can be a moment to broaden your watchlist with a few focused stock ideas.

• Target value opportunities by scanning these 882 undervalued stocks based on cash flows that may align more closely with your expectations on price and fundamentals.
• Spot potential income ideas by checking out these 14 dividend stocks with yields > 3% that could complement your existing holdings.
• Explore emerging tech themes by reviewing these 29 quantum computing stocks that may fit a higher risk, higher potential allocation.

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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