TDK (TSE:6762) Teams Up With LG Innotek, Is The Stock Cheap Or Pricey?
LG Innotek’s new physical AI partnership with TDK (TSE:6762) has put the stock in focus as investors assess what integrated vision and tactile sensing modules could mean for TDK’s sensor driven business.
See our latest analysis for TDK.
The LG Innotek partnership lands at a time when TDK’s 1 day share price return of 6.99% contrasts with a share price that is down 18.70% over the past month, while the 1 year total shareholder return of 63.10% and 5 year total shareholder return of 308.40% point to strong longer term momentum.
If this physical AI story has your attention, it can be useful to look at other robotics and automation opportunities using the Simply Wall St screener for 34 robotics and automation stocks
Bulls see TDK’s physical AI partnership as a fresh leg in a long run, while bears point to the sharp pullback and valuation risks. Which side does the current evidence on price and fundamentals support?
Most Popular Narrative: 21.5% Undervalued
The most widely followed narrative for TDK currently points to a fair value of ¥3,830.59 compared with the last close at ¥3,008. This gap is built on detailed assumptions about earnings, margins and the price investors might pay for those earnings several years from now.
The analysts have a consensus price target of ¥3,830.59 for TDK based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ¥5,500.0 and the most bearish reporting a price target of just ¥1,900.0.
Want to see what justifies that gap between today’s price and the fair value for TDK? The core of this narrative is sustained revenue growth, rising margins and a future earnings multiple that assumes the company can keep compounding its profits. Curious which specific earnings path and profit profile underpin that outcome?
Result: Fair Value of ¥3,830.59 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, there are still clear risks to the TDK story, including the ongoing U.S. antitrust class action and softer demand in key automotive and industrial markets.
Find out about the key risks to this TDK narrative.
Another View on TDK’s Valuation
There is a clear split between the analyst narrative that sees TDK as 21.5% undervalued and Simply Wall St’s own DCF output. The SWS DCF model points to a value of ¥2,140.16 per share, which is well below the current price of ¥3,008 and frames the stock as overvalued on that basis. Which story do you think reflects risks around tariffs, end market demand and margins more accurately?
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 TDK 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 18 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
With mixed signals around TDK’s valuation and outlook, it makes sense to move quickly and test the assumptions against your own research. To weigh up both the potential rewards and the key risks in one place, start with the 2 key rewards and 1 important warning sign.
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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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