Searching for hidden treasures on the Japanese stock market Three stocks that may be trading below their estimated fair value

With Japanese stock markets posting notable gains this week, with the Nikkei 225 Index up 2.6% and the TOPIX Index up 3.1%, investors are keeping a close eye out for opportunities in a market supported by a historically weak yen and expectations of monetary policy tightening by the Bank of Japan. In such an environment, identifying stocks that may be trading below their estimated fair value could present valuable opportunities for those looking to invest in potential hidden gems in the Japanese stock market.

The 10 most undervalued stocks in Japan based on cash flows

Click here to see the full list of 98 stocks from our Undervalued Japanese Stocks Based on Cash Flow screener.

Let’s discover some pearls from our specialized screener

Overview: Infomart Corporation operates an online B2B e-commerce trading platform tailored to the food industry in Japan with a market capitalization of approximately 69.91 billion yen.

Operations: The company’s main revenue comes from its online B2B e-commerce platform, which focuses on the food sector in Japan.

Estimated discount to fair value: 15.8%

Currently trading at 309 yen, Infomart is considered undervalued with an estimated fair value of 366.99 yen, representing a potential undervaluation of 15.8% on a discounted cash flow basis. The company’s earnings are expected to grow 38.1% annually over the next three years, significantly outperforming the average growth rate of the Japanese market. While robust, the revenue growth forecast of 12.5% ​​per year is not exceptional compared to high-growth benchmarks. Analysts expect the stock price to rise 44.6% despite recent price volatility and one-off financial items that affect earnings quality.

Overview: SHIFT Inc. specializes in providing software quality assurance and testing solutions in Japan and has a market capitalization of approximately 256.66 billion yen.

Operations: The company focuses on providing software quality assurance and testing solutions and has a market capitalization of approximately 256.66 billion yen.

Estimated discount to fair value: 28.0%

SHIFT is significantly undervalued at 14,580 yen and trades 28% below that level with an estimated fair value of 20,259.48 yen. Outperforming performance is expected as earnings growth is estimated at 26.8% annually and revenue growth at 21.9%. Both figures are well above the Japanese market average of 8.8% and 4.1% respectively. Analyst consensus is for a potential share price increase of over 100%. However, the share price has been very volatile recently.

Overview: FP Partner Inc. operates in Japan and provides insurance services to individuals and companies. Its market capitalization is approximately 67.47 billion yen.

Operations: The company generates its revenue by providing customized insurance solutions to private and corporate customers in Japan.

Estimated discount to fair value: 42.3%

FP Partner is currently valued at 2925 yen and is significantly undervalued based on cash flows with an estimated fair value of 5067.34 yen. This represents a significant undervaluation. Despite the unstable dividend history and highly volatile share price in recent months, the company’s earnings are expected to grow 17.4% annually, outperforming the Japanese market average of 8.8%. The latest forecasts call for a strong half-year performance with net sales of 16.79 billion yen, and full-year forecasts suggest further sales growth to 35.63 billion yen.

Next Steps

• Click here to take a closer look at our list of 98 undervalued Japanese stocks based on cash flows.
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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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