Assessing Internet Initiative Japan (TSE:3774) After Its Expanded Safous Cybersecurity Upgrade

Safous upgrade puts cybersecurity in focus for Internet Initiative Japan

Internet Initiative Japan (TSE:3774) just rolled out an upgraded Safous Security Assessment, adding broader attack surface monitoring, sharper threat intelligence, and subscriber perks like monthly risk reports, real time alerts, and optional expert consulting.

For investors, this move reinforces IIJ’s push deeper into cybersecurity services, a segment tied to recurring revenue and rising demand as companies tighten external threat monitoring and resilience strategies.

See our latest analysis for Internet Initiative Japan.

That Safous upgrade lands as Internet Initiative Japan’s share price hovers around ¥2,858.5, with modest short term share price gains but a strong five year total shareholder return suggesting underlying momentum is still intact despite a softer past year.

If this cybersecurity move has you thinking more broadly about digital infrastructure plays, it is worth scouting other names through our high growth tech and AI stocks for fresh ideas.

With growth still healthy and the stock trading at a notable discount to analyst targets and intrinsic value estimates, the key question now is whether IIJ is genuinely undervalued or if markets are already pricing in its next leg of growth.

Price-to-Earnings of 22.5x: Is it justified?

On a price-to-earnings basis, Internet Initiative Japan trades on 22.5x at ¥2,858.5 per share, a richer valuation than many telecom peers.

The price-to-earnings ratio compares today’s share price with the company’s current earnings. It offers a quick way to gauge how much investors are paying for each unit of profit in a relatively mature, cash generative sector such as telecoms and network services.

Here, the market is assigning IIJ a premium multiple versus both the Asian telecom industry average of 15.8x and a peer average of 13.7x. This implies investors are pricing in stronger growth and quality than a typical regional operator, even though recent earnings growth has not consistently outpaced the wider telecom space and return on equity sits below the 20% benchmark.

Compared with an estimated fair price-to-earnings ratio of 19.4x, the current 22.5x still appears stretched. This indicates that if sentiment cools, the market multiple could drift closer to that fair level rather than move further away from it.

Explore the SWS fair ratio for Internet Initiative Japan

Result: Price-to-Earnings of 22.5x (OVERVALUED)

However, slowing earnings momentum or a de-rating in high growth telecom and cybersecurity names could quickly compress IIJ’s premium multiple.

Find out about the key risks to this Internet Initiative Japan narrative.

Another view: DCF points in the opposite direction

While the current price to earnings ratio suggests Internet Initiative Japan is expensive, our DCF model tells a different story. It indicates the shares trade around 47.8% below an estimated fair value of about ¥5,474 per share. Could the market be underestimating the company’s long term cash generation?

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 Internet Initiative Japan 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 914 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 Internet Initiative Japan Narrative

If you would rather challenge these assumptions and dig into the numbers yourself, you can build a personalised view in just a few minutes: Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Internet Initiative Japan.

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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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