Is Hirogin Holdings (TSE:7337) A Bargain As Strong Results Lift Dividend Guidance?

Hirogin Holdings (TSE:7337) is back in focus after first quarter results showed higher net interest income of ¥29,472 million and net income of ¥14,128 million, alongside increased dividend guidance and new earnings forecasts.

See our latest analysis for Hirogin Holdings.

The share price of Hirogin Holdings has moved up strongly over the past year, with a year-to-date share price return of 47.53% and a 1-year total shareholder return of 72.87%, supported by recent earnings, dividend guidance and buyback activity.

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The recent jump in Hirogin Holdings reflects stronger reported earnings, richer dividend guidance and active buybacks. However, the speed of the move hints at hotter sentiment too. How does the current valuation balance those two forces?

Price-to-Earnings of 15.1x: Is it justified?

The current move in Hirogin Holdings now lines up with a P/E of 15.1x, which screens as good value relative to both peers and the broader Japanese banks sector.

The P/E multiple compares the share price to earnings per share. For a bank like Hirogin Holdings, it is a quick way to see how the market is pricing current and forecast profitability.

• Hirogin Holdings is described as trading at good value compared to peers and the industry, with a P/E of 15.1x versus a peer average of 18.2x.
• The same 15.1x P/E is also below the JP Banks industry average of 15.4x.
• Relative to an estimated fair P/E of 15.6x, the current multiple is slightly lower, which suggests the price is not stretched on this measure.

Put together, the stock is priced below both the peer average and the estimated fair ratio level. If the market were to move towards that fair P/E estimate, it would imply some room for the multiple to close that gap, although that is not guaranteed.

Explore the SWS fair ratio for Hirogin Holdings

Result: Price-to-Earnings of 15.1x (ABOUT RIGHT)

However, Hirogin Holdings still faces risks if credit costs rise or domestic demand softens. These factors could pressure earnings and challenge the recent sentiment shift.

Find out about the key risks to this Hirogin Holdings narrative.

Another View on Hirogin Holdings Using DCF

While the 15.1x P/E makes Hirogin Holdings look reasonably priced, the SWS DCF model suggests a different perspective. With the share price at ¥2,356 and an estimated future cash flow value of ¥2,286.34, the stock appears slightly overvalued using this method. Which signal carries more weight for you?

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 Hirogin Holdings 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 25 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

With sentiment on Hirogin Holdings looking mixed after recent gains, it makes sense to move quickly and test the story against the underlying data yourself. To weigh up both sides of the argument, take a closer look at the 4 key rewards and 2 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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