OMRON (TSE:6645) has drawn fresh attention after its recent share price moves, with the stock roughly flat over the past day but higher for the year to date and over the past 12 months.
Short term momentum around OMRON has cooled, with a 30 day share price return down 4.64%. However, the 90 day move is up 11.89% and the 1 year total shareholder return is 58.25%, which points to strong longer term gains but more mixed recent sentiment.
Scan beyond OMRON's recent momentum and line up other robotics and automation plays using the hand picked 92 robotics and automation stocks for your watchlist.
Bulls point to OMRON's strong 1 year return and recent revenue and net income growth. Bears flag the weak 5 year record and low value score. Which side do the current valuation markers support next?
Price-to-Earnings of 28.6x: Is it justified?
OMRON trades on a P/E of 28.6x, which leaves the stock looking expensive compared with several reference points even after its strong 1 year return.
The P/E ratio compares the current share price with earnings per share. For a group like OMRON that generates profit across industrial automation, healthcare and social systems, this measure helps you see how much investors are willing to pay for each unit of earnings.
There is a clear tension here. Earnings declined by an average of 23% per year over the past 5 years, yet profit grew 32.9% over the last year and is forecast to increase 15.1% per year, ahead of the wider JP market at 9.1% per year. A 28.6x multiple suggests the market is paying up for that recent rebound and future profit expectations, even though Return on Equity is currently low at 5.4% and forecast to remain low at 7.5% in three years.
On relative value, the P/E of 28.6x sits well above the JP Electronic industry average of 16.6x, which implies a hefty premium. At the same time, it is below the peer average of 41.5x, which points to a discount versus closer robotics and automation comparables and gives a level that the market could move toward if sentiment shifted.
Explore the SWS fair ratio for OMRON.
Result: Price-to-Earnings of 28.6x (OVERVALUED).
Still, the weak 5 year total return and very low value score of 1 leave OMRON exposed if profit momentum or sentiment toward automation fades.
Find out about the key risks to this OMRON narrative .
Another view on OMRON's value
The P/E screen paints OMRON as expensive, and the SWS DCF model pushes that point even further. On this framework, the share price of ¥6,325 sits above an estimated future cash flow value of ¥4,102.29, which points to an overvalued stock and a thinner margin of safety. How comfortable are you paying up when both earnings multiples and cash flow math lean the same way?
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 OMRON 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 19 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
Mixed signals around OMRON can pull you in either direction, so move quickly, weigh the full picture of risks and rewards, and stress test your view against the 2 key rewards and 1 important warning sign
Looking for more OMRON sized investment ideas?
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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.
Companies discussed in this article include 6645.T .
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