Assessing Whether NSK (TSE:6471) Looks Overvalued After Strong Recent Share Price Momentum

Recent share performance and business backdrop

NSK (TSE:6471) has been on investors’ radar after a period of strong share price moves, with the stock showing positive returns over the past week, month and past 3 months.

That price action is set against a large, diversified bearings and automotive components business headquartered in Tokyo, with reported annual revenue of ¥811,274 and net income of ¥17,980.

See our latest analysis for NSK.

Against this backdrop, NSK’s recent 6.22% 7 day share price return and 33.91% 3 month share price return sit alongside a 60.14% 1 year total shareholder return. This suggests momentum has been building rather than fading.

If NSK’s rebound has you interested in auto related names, it might be a time to scan auto manufacturers for other ideas in the space.

With NSK delivering a 60.14% 1 year total return and trading at ¥1,036.5 versus an analyst price target of ¥848.33, investors may wonder whether there is still upside available or if the market is already pricing in future growth.

Most Popular Narrative: 22.2% Overvalued

With NSK last closing at ¥1,036.5 against a narrative fair value of ¥848.33, the prevailing view is that the market price sits ahead of the earnings story.

Structural reforms, including downsizing and restructuring production in Europe and Japan and exiting some non-core businesses, are projected to lead to a ¥9 billion improvement in profitability by 2026, positively impacting net margins. The shift towards producing more high-value products and enhancing local production in key regions like the Americas and China could improve cost efficiency and sales, potentially increasing both revenue and net margins.

Read the complete narrative.

Want to see what kind of revenue mix and margin rebuild could underpin that higher fair value? The narrative leans heavily on earnings compounding and a future profit multiple that is usually reserved for stronger profitability profiles. Curious how those assumptions connect to today’s P/E and the discount rate baked into the model?

Result: Fair Value of ¥848.33 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, there are still pressure points, including weaker demand in Europe and China as well as cost inflation that could squeeze margins and challenge those earnings assumptions.

Find out about the key risks to this NSK narrative.

Build Your Own NSK Narrative

If you see the numbers differently or simply prefer to work from your own assumptions, you can build a custom view in minutes, starting with Do it your way.

A great starting point for your NSK research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

If you stop with a single stock, you risk missing other opportunities that might fit your style better, so broaden your view with a few focused screens.

• Spot potential value plays by scanning these 886 undervalued stocks based on cash flows that align with cash flow based pricing rather than short term buzz.
• Tap into long term tech themes by checking out these 26 AI penny stocks that could benefit from advances in artificial intelligence across multiple industries.
• Target income focused opportunities by reviewing these 12 dividend stocks with yields > 3% that offer yields above 3% alongside stock market exposure.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com