Subaru (TSE:7270) Valuation Check After Recent Share Price Momentum And Mixed P/E And DCF Signals

Why Subaru (TSE:7270) is on investors’ radar today

Subaru (TSE:7270) has caught investor attention after a recent share move that leaves the stock showing a 1.5% 1 day return and 3.9% gain over the past month.

See our latest analysis for Subaru.

That short term momentum comes on top of a 10.6% 3 month share price return and a 30.7% 1 year total shareholder return, suggesting that interest in Subaru’s longer term story is still building.

If Subaru’s recent move has you looking at the auto space more broadly, this could be a good moment to check out other auto manufacturers that are catching market attention.

With Subaru trading at ¥3,445 and sitting slightly above the average analyst price target and intrinsic value estimates, you have to ask: is the stock already fully priced, or is the market still underestimating its future prospects?

Price-to-Earnings of 9.3x: Is it justified?

At roughly ¥3,445 per share, Subaru trades on a P/E of 9.3x, which sits below both the broader Japan market and auto peers that trade on higher earnings multiples.

The P/E ratio compares the current share price to the company’s earnings per share. It reflects how much investors are currently paying for each unit of earnings. For an established auto group like Subaru, P/E is a common way investors compare it with other listed car makers and the wider market.

Here, the market price implies a P/E of 9.3x, while several reference points are higher. The peer average P/E sits at 14.1x, the Asian auto industry sits around 18.7x and our fair P/E estimate for Subaru sits near 14.9x.

Against that backdrop, the stock is currently described as trading at good value compared to peers and the industry, with investors paying less per unit of earnings than those reference groups.

Explore the SWS fair ratio for Subaru

Result: Price-to-Earnings of 9.3x (UNDERVALUED)

However, there are watchpoints, including Subaru trading above the average analyst target and its exposure to cyclical auto demand across Japan, North America, and other key regions.

Find out about the key risks to this Subaru narrative.

Another view: what does the DCF say?

While the P/E of 9.3x makes Subaru look inexpensive versus peers, our DCF model points in the opposite direction. With the share price at ¥3,445 and our DCF fair value estimate at ¥2,289.78, this method frames the stock as overvalued on a cash flow basis. It leaves you asking which signal deserves more weight right now.

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 Subaru 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 870 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 Subaru Narrative

If you look at these signals and reach a different conclusion, or simply prefer to test your own assumptions using the same data, you can build a tailored view in just a few minutes with Do it your way.

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

Looking for more investment ideas?

If you are weighing Subaru and thinking about what to research next, do not stop here. Broaden your watchlist with focused screens built to surface clear themes.

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• Hunt for mispriced opportunities by filtering for these 870 undervalued stocks based on cash flows where current prices sit below cash flow based assessments.

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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