Find winning stocks in any market cycle. Join 7 million investors using Simply Wall St's investing ideas for FREE.
-
If you are wondering whether KDDI is still reasonably priced after recent gains, the stock's current level may make you question if there is value left on the table.
-
At a last close of ¥2,769, KDDI's shareholders have seen returns of 4.4% over the past week, 9.0% over the past month, 1.3% year to date, 17.8% over 1 year, 35.2% over 3 years and 86.1% over 5 years.
-
Recent attention on KDDI has been shaped by ongoing coverage of the company within the Japanese telecom sector and its role as a major wireless provider. This context has kept investors focused on how its share price compares with underlying fundamentals rather than just short term news flow.
-
KDDI currently scores a 4 out of 6 on our valuation checks, which sets the scene to compare different valuation methods next and then return to an even richer way to judge whether the stock appears attractive or not.
Find out why KDDI's 17.8% return over the last year is lagging behind its peers.
Approach 1: KDDI Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model takes projections of a company's future cash flows and discounts them back to today's value, aiming to estimate what the business might be worth right now based on those cash flows.
For KDDI, the model used is a 2 Stage Free Cash Flow to Equity approach, built on cash flow projections rather than earnings multiples. The latest twelve month Free Cash Flow is reported at ¥1.06b, and analysts provide explicit Free Cash Flow estimates for several years, with Simply Wall St extrapolating further out. By 2035, the ten year projection set includes forecast Free Cash Flow figures that are in the high hundreds of billions of ¥, with each year discounted back to today to reflect risk and the time value of money.
Aggregating these discounted amounts results in an estimated intrinsic value of ¥5,444.99 per share, compared with the recent share price of ¥2,769. On this basis, the model suggests KDDI stock trades at a 49.1% discount to its DCF estimate, which points to a meaningful valuation gap.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests KDDI is undervalued by 49.1%. Track this in your watchlist or portfolio , or discover 17 more high quality undervalued stocks .
Approach 2: KDDI Price vs Earnings
For a profitable company like KDDI, the P/E ratio is a useful way to think about what you are paying for each ¥ of current earnings. This tends to be more stable than revenue or book value for mature telecom businesses.
What counts as a "normal" P/E depends on how fast earnings are expected to grow and how risky those earnings are. Higher growth and lower perceived risk usually justify a higher multiple, while slower growth or higher uncertainty usually point to a lower one.
KDDI currently trades on a P/E of 14.91x. That sits below the Wireless Telecom industry average of 15.50x and also below the peer group average of 16.00x. Simply Wall St also calculates a proprietary Fair Ratio for KDDI of 13.62x, which reflects factors such as earnings growth characteristics, profit margins, industry, market cap and risk profile.
The Fair Ratio goes further than a simple comparison with peers or the industry because it is tailored to KDDI's own metrics rather than relying on broad group averages that may include very different companies.
Since KDDI's actual P/E of 14.91x is above the Fair Ratio of 13.62x by more than a small margin, the stock screens as slightly expensive on this measure.
Result: OVERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 12 top founder-led companies .
Upgrade Your Decision Making: Choose your KDDI Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives are introduced as your way of attaching a clear story about KDDI to specific numbers such as fair value, future revenue, earnings and margins, so that a company's story connects directly to a forecast and then to a price you think is reasonable.
On Simply Wall St's Community page, Narratives give you an easy tool to do this, helping you compare your own fair value with the current share price and decide if the gap is wide enough to consider buying, holding or selling, without needing to build a full model yourself.
These Narratives are kept current because when new information comes in, such as news, earnings or guidance, the assumptions and fair values behind them are refreshed so your view does not stay stuck on old data.
For KDDI, one investor might align with a more optimistic Narrative that points to a fair value around ¥3,321, while another might prefer a cautious view closer to ¥1,865. Narratives let you see exactly which revenue and earnings paths sit behind each of those perspectives, so you can decide which story fits your own expectations.
For KDDI however we will make it really easy for you with previews of two leading KDDI Narratives:
Fair value: ¥2,785.07
Gap to current price: trading about 0.6% below this fair value based on the last close of ¥2,769.00
Assumed revenue growth: 4.20% a year
-
Focuses on growth in data heavy mobile plans and integrated financial services to deepen customer engagement and support earnings.
-
Highlights ongoing spending on 5G, IoT and digital solutions as a way to broaden revenue across consumer and enterprise segments.
-
Flags risks from a saturated domestic market, competitive pricing and mixed results in newer areas like digital BPO and data centers.
Fair value: ¥2,059.29
Gap to current price: trading about 34.4% above this fair value based on the last close of ¥2,769.00
Assumed revenue growth: 2.55% a year
-
Questions whether heavy investment in infrastructure, AI and data centers will earn enough to justify the spend and protect returns.
-
Suggests that building large AI and security teams and expanding connected services could lift costs faster than revenue if adoption disappoints.
-
Argues that if growth projects underperform and competition stays intense, the current share price could be too optimistic relative to this scenario.
Once you have a sense of which KDDI story fits your expectations, it is worth checking the full set of community views to see how other investors are joining the dots between growth, risk and price for this stock, and how those views change as new information comes through. See what the community is saying about KDDI .
Do you think there's more to the story for KDDI? Head over to our Community to see what others are saying!
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 9433.T .
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
