PARK24 and two other Japanese stocks are being considered for value investing opportunities

Against the backdrop of slight declines in Japanese equity markets, with the Nikkei 225 and TOPIX indices posting negative returns due to monetary policy uncertainties, investors may find value in searching for undervalued stocks. In such an environment, identifying companies with solid fundamentals and growth potential becomes crucial for those considering value investing opportunities in Japan.

The 10 most undervalued stocks in Japan based on cash flows

Click here to see the full list of 100 stocks from our Undervalued Japanese Stocks Based on Cash Flows screener.

Here we highlight a selection of our favorite stocks from the screener

Overview: PARK24 Co., Ltd. specializes in the operation and management of parking facilities in Japan and internationally and has a market capitalization of approximately 278.07 billion yen.

Operations: The company generates its revenue primarily through the operation and management of parking facilities worldwide.

Estimated discount to fair value: 13.4%

PARK24 is currently trading at 1630 yen and is considered undervalued based on DCF analysis with an estimated fair value of 1881.96 yen. Despite the high level of debt, the company’s earnings have increased by 67.5% over the past year and are expected to grow by 12.71% annually. In addition, PARK24’s revenue growth is expected to outperform the Japanese market with an annual increase of 5.5% compared to 4.2% in the market. However, the valuation remains just below the threshold of significant undervaluation.

Overview: Strike Company Limited (TSE: 6196) operates as a mergers and acquisitions broker for small and medium-sized companies in Japan and has a market capitalization of approximately 90.64 billion yen.

Operations: The company specializes in providing mergers and acquisitions brokerage services to small and medium-sized enterprises across Japan.

Estimated discount to fair value: 14.3%

Strike Company Limited appears to be slightly undervalued with a current trading price of 4720 yen versus a DCF estimated fair value of 5508.22 yen. The recent upward revision to the company’s earnings forecast highlights robust operating momentum, forecasting significant increases in net sales and earnings for the first half of fiscal 2024. Earnings are expected to grow 17.58% annually, outperforming the Japanese market average. However, the share price has been very volatile recently, which poses additional risk despite strong financial forecasts and performance indicators.

Overview: KATITAS CO., Ltd. operates in Japan and is engaged in the surveying, purchase, renovation, remodeling and sale of used homes to individuals and families with a market capitalization of approximately 136.45 billion yen.

Operations: The company generates its revenue primarily from its reproduction resale business, which amounts to 126.72 billion yen.

Estimated discount to fair value: 33.2%

KATITAS CO., Ltd. trades at 1750 yen, well below the estimated fair value of 2619.96 yen, suggesting potential undervaluation based on cash flows. While revenue growth (7.1% per year) and earnings growth (9.3% per year) are expected to outperform the Japanese market average, concerns remain due to the unstable dividend history and recent corporate actions, including a decision to sell treasury shares as restricted compensation and an ongoing legal appeal. This mixed financial landscape suggests cautious optimism for investors who use cash flow metrics for valuation.

The central theses

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This Simply Wall St article is of a general nature. We provide commentary based solely on historical data and analyst forecasts, using an unbiased methodology. Our articles are not intended as financial advice. They do not constitute a recommendation to buy or sell stocks, and do not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.

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