Chiyoda (TSE:6366): Assessing Valuation After a Sharp Three-Month Share Price Rebound

Chiyoda (TSE:6366) has quietly turned heads with a sharp share price rebound over the past 3 months, even as revenue and net income have slipped year on year, raising some valuation questions.

See our latest analysis for Chiyoda.

That 76.38% 3 month share price return sits on top of an already strong year to date gain of 118.01%. A 124.28% 1 year total shareholder return suggests momentum has meaningfully shifted in Chiyoda's favour despite weaker top line trends.

If Chiyoda's run has you rethinking where growth and quality might show up next, it could be worth scanning fast growing stocks with high insider ownership for other potential candidates catching early investor interest.

Yet with revenue and earnings sliding and the share price now sitting above analyst targets, the key question is whether Chiyoda still trades below its true worth or if markets are already pricing in the next leg of growth?

Price-to-Earnings of 6.4x: Is it justified?

On a simple earnings lens, Chiyoda looks inexpensive at a 6.4x price-to-earnings ratio compared with both the wider Japanese market and its construction peers.

The price-to-earnings multiple compares the current share price with per share earnings. This makes it a core valuation yardstick for profitable, mature engineering and construction businesses like Chiyoda.

Here, the market is valuing Chiyoda at less than half the earnings multiple of the broader JP market, and well below the construction peer group, despite the company being solidly profitable and reporting a 66.9% return on equity.

Against the Japanese construction industry average P/E of 12.7x, Chiyoda’s 6.4x multiple implies a steep discount. Even relative to its own estimated fair P/E of 10.1x, the current pricing suggests meaningful room for re-rating if profitability and returns on equity remain robust.

Explore the SWS fair ratio for Chiyoda

Result: Price-to-Earnings of 6.4x (UNDERVALUED).

However, sliding revenue and earnings, plus a share price already above analyst targets, could quickly reverse sentiment if profitability disappoints from this point forward.

Find out about the key risks to this Chiyoda narrative.

Build Your Own Chiyoda Narrative

If you see the story differently or want to dig into the numbers yourself, you can build a personalised view in under three minutes: Do it your way.

A great starting point for your Chiyoda research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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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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