Is Starts (TSE:8850) Cheap As First Quarter Earnings And Guidance Reset Expectations?

Starts (TSE:8850) drew fresh attention after reporting first quarter earnings and issuing new guidance for the current fiscal year. Investors now have updated figures on recent performance and management expectations through March 2027.

See our latest analysis for Starts.

The Starts share price has edged higher in recent weeks, with a 7 day share price return of 1.71% and a 90 day share price return of 2.48%. Over a 1 year period the total shareholder return is down 2.88%, while the 5 year total shareholder return is up 97.92%. This indicates that long term holders have still seen strong compounding even as near term momentum is more muted around the latest earnings and guidance.

If this earnings update has you thinking about where else to put fresh capital to work, it could be a good time to look at 13 top founder-led companies

With Starts shares edging up after the latest earnings and guidance, investors now face a choice: commit at today’s price or wait and hope for a cheaper entry later. The valuation numbers help frame that decision next.

Price-to-Earnings of 8.8x: Is it justified?

On a P/E of 8.8x at a last close of ¥4,760, Starts looks cheaper than many peers and the broader Japan market on this earnings measure.

The P/E ratio compares the share price to earnings per share, so it gives you a quick sense of how much investors are paying for each unit of current profit. For a company like Starts, which operates across construction, real estate management and related services, earnings based measures are a common way investors benchmark value.

Starts is described as trading at good value compared with peers, the Japan Real Estate industry average P/E of 10.2x and the broader Japan market P/E of 13.9x. The current P/E also sits below an estimated fair P/E of 13.1x. This suggests the market valuation could shift closer to that fair ratio if sentiment or expectations change.

Explore the SWS fair ratio for Starts

Result: Price-to-Earnings of 8.8x (UNDERVALUED)

However, you still need to watch for softer real estate activity in Japan or weaker earnings delivery, which could keep Starts trading on a lower P/E multiple.

Find out about the key risks to this Starts narrative.

Another view on Starts using the SWS DCF model

The earlier P/E discussion made Starts look inexpensive. Yet our DCF model points the other way. With the share price at ¥4,760 and an estimated future cash flow value of ¥987.62, the stock screens as overvalued on this approach. Which signal do you trust more?

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 Starts 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 26 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

The mixed signals around Starts can feel confusing, so move quickly from headline impressions to your own opinion by weighing both sides of the story and checking the 4 key rewards and 1 important warning sign

Looking for more investment ideas beyond Starts?

If Starts has sharpened your focus on valuation and quality, now is a good time to broaden your watchlist with a few targeted stock ideas.

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.

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