If you are wondering whether Astellas Pharma’s share price still offers value after its recent run, this article walks through what the current market price might be implying.
The stock last closed at ¥2,531.5, with returns of 12.6% over 7 days, 13.2% over 30 days, 18.8% year to date, 48.3% over 3 years and 69.9% over 5 years, plus a 1 year return of 83.5% that may catch your eye.
Recent coverage around Astellas Pharma has focused on its position in the broader pharmaceuticals and biotech space, including how its product pipeline and R&D investments fit within the sector. Commentary has also highlighted how regulatory developments and competitive pressures could affect how investors think about the stock’s risk and opportunity profile.
Astellas Pharma currently has a valuation score of 5/6. This means it screens as undervalued on most of the six checks we use. Next, we will walk through those methods before finishing with a more holistic way to think about whether the stock suits your portfolio.
A Discounted Cash Flow, or DCF, model estimates what a company might be worth today by projecting its future cash flows and discounting them back to a present value.
For Astellas Pharma, the model uses a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about ¥374.4b. Analysts provide forecasts out to 2030, with free cash flow for that year projected at ¥397.0b, and Simply Wall St extends the pattern further using its own extrapolation to build a 10 year path of cash flows in ¥.
When all those projected cash flows are discounted back and divided by the number of shares, the DCF model arrives at an estimated intrinsic value of about ¥5,034 per share. Compared with the recent share price of ¥2,531.5, this suggests the stock trades at roughly a 49.7% discount to that estimate based on this model.
P/E is a useful yardstick for a profitable company like Astellas Pharma because it links what you pay directly to the earnings the business is already generating. Investors typically accept a higher P/E when they expect stronger earnings growth or see the business as lower risk, and a lower P/E when growth expectations or perceived risks are higher.
Astellas Pharma currently trades on a P/E of 14.0x. That sits slightly below the Pharmaceuticals industry average of about 15.3x and well below the peer group average of around 30.8x. Simply Wall St also calculates a “Fair Ratio” for the stock, which is 21.6x. This Fair Ratio reflects factors such as Astellas Pharma’s earnings profile, its industry, margins, market size and specific risk characteristics.
Because the Fair Ratio is tailored to the company, it can provide a more targeted yardstick than broad industry or peer comparisons, which may bundle together businesses with very different growth and risk profiles. With Astellas Pharma’s current P/E of 14.0x sitting below the Fair Ratio of 21.6x, this framework suggests the shares screen as relatively inexpensive on earnings.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple tool on Simply Wall St’s Community page that lets you set out your own story for Astellas Pharma. It translates that story into assumptions for future revenue, earnings and margins, connects those assumptions to a Fair Value, and then compares that Fair Value with the current share price to help you decide whether the stock looks appealing or not. The Narrative automatically updates as new earnings, news or guidance arrive, and different investors can take very different views. For example, one Narrative ties a Fair Value of ¥1,500 to expectations for revenue trends and margins, while another supports a Fair Value of ¥2,400 based on a stronger outlook for earnings and profitability.
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.
Companies discussed in this article include 4503.T.
