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If you have been wondering whether Rakuten Group's current share price actually reflects its true potential, you are not alone. This piece is going to walk through the numbers with you.
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After a volatile few years, the stock is up 8.2% year to date but still down 11.6% over the last month and 5.4% over the past year. This hints at shifting market expectations around its growth story and risk profile.
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Recently, investors have been reacting to Rakuten's ongoing push to scale its mobile network, restructure debt, and streamline its sprawling ecosystem, all while tightening its focus on core digital services. Headlines around asset sales, partnerships, and balance sheet repair have added both optimism and caution to how the market prices the stock today.
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On our checks, Rakuten Group scores 3/6 for valuation, suggesting it looks undervalued on several, but not all, metrics. Next we will unpack how different valuation approaches view the shares, while keeping an eye on a smarter way to think about value that we will come back to at the end.
Find out why Rakuten Group's -5.4% return over the last year is lagging behind its peers.
Approach 1: Rakuten Group Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model estimates what a business is worth today by projecting the cash it could generate in the future and discounting those cash flows back to the present.
For Rakuten Group, the latest twelve month free cash flow is negative at roughly ¥23.2 billion, reflecting the heavy investment phase the business is in. Analysts and Simply Wall St projections suggest a sharp improvement ahead, with free cash flow expected to reach about ¥656.2 billion by 2029 and continue rising towards roughly ¥1.47 trillion by 2035, as loss making operations mature and capital intensity eases.
Using a 2 Stage Free Cash Flow to Equity model, these projected cash flows are discounted back to arrive at an intrinsic value of around ¥4,182 per share. Compared with the current market price, this implies the shares are trading at a 77.8% discount to that estimated value. This indicates a wide gap between the market's cautious view and the model's more optimistic long term outlook.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Rakuten Group is undervalued by 77.8%. Track this in your watchlist or portfolio , or discover 903 more undervalued stocks based on cash flows .
Approach 2: Rakuten Group Price vs Sales
For companies where current profits do not yet reflect their scale or investment phase, the Price to Sales (P/S) ratio is often a more practical gauge of value than earnings based multiples. It lets investors compare how much the market is paying for each unit of revenue, which tends to be more stable than earnings during heavy investment cycles. Over time, faster growing and lower risk businesses typically justify a higher P/S multiple, while slower growth, thinner margins, or higher financial and competitive risks point to a lower, more conservative range.
Rakuten Group currently trades on a P/S of 0.82x, which is slightly above the Multiline Retail industry average of about 0.70x, but below the peer group average of roughly 1.53x. Simply Wall St's Fair Ratio for Rakuten, at 0.73x, is a proprietary estimate of what its P/S should be given its revenue growth outlook, profitability profile, industry positioning, scale, and risk factors. Unlike simple peer or industry comparisons, this Fair Ratio adjusts for company specific drivers rather than assuming all retailers deserve the same multiple. Comparing Rakuten's actual 0.82x P/S with the 0.73x Fair Ratio suggests the stock is trading modestly above what fundamentals alone would justify, which points to a mild premium.
Result: OVERVALUED
PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1443 companies where insiders are betting big on explosive growth .
Upgrade Your Decision Making: Choose your Rakuten Group Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of Rakuten Group's story with hard numbers like future revenue, earnings, margins, and what you think is a fair value per share.
A Narrative on Simply Wall St is your investment story written in numbers, linking what you believe about a company's strategy, competitive edge, and risks to a financial forecast, and then to a Fair Value that you can directly compare with today's share price to decide whether it looks like a buy, a hold, or a sell.
These Narratives sit inside the Community page used by millions of investors. They are easy to set up and update, and automatically refresh when new information, such as earnings results or major news headlines, changes the outlook so your fair value view stays current without you having to rebuild your thesis from scratch.
For Rakuten Group, one investor might build an optimistic Narrative with a fair value near ¥1,200 based on faster revenue growth, stronger mobile profitability and higher future margins. Another might set a more cautious Narrative closer to ¥510, assuming slower growth, execution risks, and a lower PE, showing how the same company can reasonably support very different yet transparent investment decisions.
Do you think there's more to the story for Rakuten Group? 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 4755.T .
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