Hazama Ando (TSE:1719) Joins Fusion Pilot Plant Project, Is The Stock Below Fair Value?

Hazama Ando (TSE:1719) drew fresh attention after Helical Fusion selected the company as an Official Partner for its Helix Program, with a memorandum of understanding to collaborate on the Helix KANATA Fusion Pilot Plant.

See our latest analysis for Hazama Ando.

Against this backdrop, Hazama Ando’s 1-year total shareholder return of 22.83% and very large 5-year total shareholder return of 172.47% contrast with a share price that is currently down 5.47% year to date. This hints that recent momentum has cooled after a strong multi year run.

If this fusion partnership has you thinking about the wider energy transition, it could be worth seeing what else is out there with the nuclear energy infrastructure stocks screener, starting with 90 nuclear energy infrastructure stocks

After Hazama Ando’s strong multi year gains and recent pullback, the key issue now is whether today’s valuation still leaves meaningful upside on the table, or if most of the opportunity is already priced in.

Price-to-Earnings of 9.6x: Is it justified?

On current numbers, Hazama Ando trades on a P/E of 9.6x, while checks suggest the stock is trading at good value relative to both peers and an estimated fair P/E level.

The P/E ratio compares the current share price with earnings per share, so a lower P/E can indicate that investors are paying less for each unit of current earnings. For a construction and engineering company like Hazama Ando, this often reflects how the market weighs its earnings quality, growth outlook and cyclicality.

Here, several data points line up in the same direction. The stock is flagged as trading at good value compared to peers and the wider industry, with the P/E of 9.6x sitting below the JP Construction industry average of 11.5x and below an estimated fair P/E of 11x. Our model suggests the market could reasonably move toward this level if sentiment and expectations were to converge.

That gap between Hazama Ando's current multiple, its industry, and the estimated fair ratio raises a simple question for investors: is the market being too cautious about its earnings profile or appropriately pricing in its forecast earnings decline and one off items affecting recent results.

Explore the SWS fair ratio for Hazama Ando

Result: Price-to-Earnings of 9.6x (UNDERVALUED)

However, Hazama Ando’s recent pullback, together with annual net income growth moving 5% lower and cyclical construction exposure, could present a challenge to the current valuation narrative.

Find out about the key risks to this Hazama Ando narrative.

Another View: Hazama Ando Through the SWS DCF Lens

While the P/E of 9.6x suggests Hazama Ando looks inexpensive versus peers, the SWS DCF model also points to undervaluation, with an estimated future cash flow value of ¥2,465.9 per share versus the current ¥1,814 price, a discount of 26.4%.

That gap only matters if the cash flow assumptions hold up and the market is willing to re-rate the stock closer to that level. The key question is how comfortable you are with those inputs versus the earnings-based view.

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 Hazama Ando 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 15 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

If the mix of enthusiasm and caution around Hazama Ando leaves you undecided, it may be helpful to take a closer look at the data now and form your own view by weighing its potential upsides against the areas of concern highlighted in the 4 key rewards and 2 important warning signs.

Looking for more investment ideas beyond Hazama Ando?

Once you have formed a view on Hazama Ando, do not leave the rest of your watchlist to chance. Use focused stock lists to spot opportunities others might miss.

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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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