Sumitomo Chemical Company (TSE:4005) Returned To Profit, Is The Stock Still A Bargain?
Why Sumitomo Chemical Company Stock Is Back on Investor Radars
Sumitomo Chemical Company (TSE:4005) has drawn fresh attention after first quarter results showed a move from loss to profit, along with higher dividend guidance and full year earnings forecasts through March 2027.
See our latest analysis for Sumitomo Chemical Company.
At a share price of ¥531.6, Sumitomo Chemical Company has seen short term 7 day share price momentum of 4.36%. Its 1 year total shareholder return of 36.07% and 3 year total shareholder return of 46.76% point to a recovery trend, despite a weaker 90 day share price return of 14.75% and a 30 day share price return that is down 3.12%.
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After Sumitomo Chemical Company's sharp swing back to profit and richer dividend guidance, the share price has already responded. The next step is to see whether the current valuation still leaves enough upside for the risk involved.
Most Popular Narrative: 18.9% Undervalued
Compared to the last close at ¥531.6, the most followed narrative puts Sumitomo Chemical Company's fair value at ¥655.7, which frames the current debate around its valuation and future earnings power.
Recovery in profitability across key segments (Agro & Life Solutions, Essential & Green Materials, ICT & Mobility Solutions) reflects improved operational efficiency, product mix optimization, and R&D driven new product launches (e.g., Orgovyx, Gemtesa, INDIFLIN), supporting the potential for higher long term revenue and net margins.
The fair value hinges on how far margins can climb, how quickly revenue compounds, and what earnings multiple the market is willing to pay if those assumptions play out.
With a discount rate of 7.37% applied to future cash flows and profit margins expected to improve from current levels, the narrative’s fair value of ¥655.7 reflects a view that Sumitomo Chemical Company can support higher earnings over time while trading on a more moderate P/E than many peers in the JP Chemicals sector.
Result: Fair Value of ¥655.7 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, Sumitomo Chemical Company still carries key risks, including pressure on petrochemicals margins and currency swings that could challenge the current recovery narrative.
Find out about the key risks to this Sumitomo Chemical Company narrative.
Another View on Sumitomo Chemical Company’s Valuation
The SWS DCF model points to a fair value of ¥520.74 for Sumitomo Chemical Company, slightly below the current share price of ¥531.6. That implies the stock screens as mildly overvalued on this approach, even though the popular narrative suggests it is 18.9% undervalued. Which lens do you trust more when the signals diverge?
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 Sumitomo Chemical Company 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 25 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
The mixed signals on Sumitomo Chemical Company raise a clear question for you: Are the rewards enough to compensate for the risks, or not? Act promptly, review both sides of the story in the data, and weigh the 3 key rewards and 3 important warning signs
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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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