Hirose ElectricLtd (TSE:6806) Lifted Guidance And Unveiled A Buyback, Is It Still Below Fair Value?

Hirose ElectricLtd (TSE:6806) has drawn fresh attention after unveiling a new share repurchase program and lifting its full year earnings forecast, while also closing a prior buyback plan.

See our latest analysis for Hirose ElectricLtd.

Hirose ElectricLtd shares trade at ¥27,715, with a 1 day share price return of 2.57% and a year to date share price return of 57.07%. The 1 year total shareholder return of 49.48% points to strong momentum that has built steadily over the past few years.

If recent buyback news has you looking beyond a single connector maker, this can be a good moment to scan other global suppliers and automation players using the 39 robotics and automation stocks.

The buybacks and upgraded full year forecast have pushed Hirose ElectricLtd sharply higher. The market price now sits between analysts’ targets and one intrinsic value estimate, so the question is where a reasonable fair value range actually falls next.

Preferred P/E of 27.3x: Is it justified for Hirose ElectricLtd?

Based on the latest data, Hirose ElectricLtd trades on a P/E of 27.3x, which sits below its peer group average but above the wider JP Electronic industry level.

The P/E ratio compares the current share price to earnings per share. For a connector and electronic components manufacturer like Hirose ElectricLtd, it is a quick way for you to see how much the market is paying for each unit of current earnings.

On one hand, 6806 screens as good value against its immediate peers, which trade on an average P/E of 45.2x. On the other hand, the stock looks expensive against the broader JP Electronic industry average of 16.1x and also against an estimated fair P/E of 21x. That gap to the fair ratio points to a level the market could potentially move toward if sentiment or growth expectations shift.

Explore the SWS fair ratio for Hirose ElectricLtd

Result: Price-to-earnings of 27.3x (OVERVALUED)

However, Hirose ElectricLtd still faces risks if connector demand softens in key regions like China, or if earnings growth slows and the current P/E premium compresses.

Find out about the key risks to this Hirose ElectricLtd narrative.

Another view on Hirose ElectricLtd using cash flows

While the 27.3x P/E suggests Hirose ElectricLtd trades at a premium to the JP Electronic industry, the SWS DCF model points to a different conclusion. At ¥27,715 the stock sits about 3.5% below an estimated fair value of ¥28,721.57. That raises a simple question for you: Which signal carries more weight?

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 Hirose ElectricLtd 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

Given the mixed signals around Hirose ElectricLtd, this is a good time to check the underlying data yourself and decide how you feel about the balance of risk and reward. To help you weigh both sides in one place, review the 3 key rewards and 1 important warning sign.

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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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