<div id="readability-page-1"><div><h3>Key Insights</h3><ul><li> The projected fair value for Monogatari is JP¥3,807 based on 2 Stage Free Cash Flow to Equity </li> <li> Monogatari's JP¥3,905 share price indicates it is trading at similar levels as its fair value estimate </li> <li> Our fair value estimate is 19% lower than Monogatari's analyst price target of JP¥4,713 </li> </ul><p>Does the June share price for The Monogatari Corporation (TSE:3097) reflect what it's really worth? Today, we will estimate the stock's intrinsic value  by projecting its future cash flows and then discounting them to today's value.  This will be done using the Discounted Cash Flow (DCF) model.  There's really not all that much to it, even though it might appear quite complex.</p><p> We generally believe that a company's value is the present value of all of the cash it will generate in the future. However, a DCF is just one valuation metric among many, and it is not without flaws.  For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you. </p><p>Trump has pledged to &#34;unleash&#34; American oil and gas and these 15 US stocks have developments that are poised to benefit.</p><h2> The Method </h2> <p> We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second 'steady growth' period.  To start off with, we need to estimate the next ten years of cash flows.   Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.  </p><p> Generally we assume that a dollar today is more valuable than a dollar in the future,  so we discount the value of these future cash flows to their estimated value in today's dollars: </p><h4> 10-year free cash flow (FCF) estimate </h4><table><tbody><tr><td> </td><td><strong>2025</strong></td><td><strong>2026</strong></td><td><strong>2027</strong></td><td><strong>2028</strong></td><td><strong>2029</strong></td><td><strong>2030</strong></td><td><strong>2031</strong></td><td><strong>2032</strong></td><td><strong>2033</strong></td><td><strong>2034</strong></td></tr><tr><td><strong> Levered FCF (¥, Millions) </strong></td><td>JP¥1.70b</td><td>JP¥3.38b</td><td>JP¥2.61b</td><td>JP¥8.60b</td><td>JP¥9.17b</td><td>JP¥9.55b</td><td>JP¥9.85b</td><td>JP¥10.1b</td><td>JP¥10.3b</td><td>JP¥10.4b</td></tr><tr><td><strong>Growth Rate Estimate Source</strong></td><td>Analyst x3</td><td>Analyst x2</td><td>Analyst x3</td><td>Analyst x1</td><td>Analyst x1</td><td>Est @ 4.23%</td><td>Est @ 3.10%</td><td>Est @ 2.30%</td><td>Est @ 1.75%</td><td>Est @ 1.36%</td></tr><tr><td><strong> Present Value (¥, Millions) Discounted @ 6.3% </strong></td><td>JP¥1.6k</td><td>JP¥3.0k</td><td>JP¥2.2k</td><td>JP¥6.7k</td><td>JP¥6.7k</td><td>JP¥6.6k</td><td>JP¥6.4k</td><td>JP¥6.2k</td><td>JP¥5.9k</td><td>JP¥5.6k</td></tr></tbody></table><p><i>(&#34;Est&#34; = FCF growth rate estimated by Simply Wall St)</i><br/><strong>Present Value of 10-year Cash Flow (PVCF)</strong> = JP¥51b</p><p> The second stage is also known as Terminal Value, this is the business's cash flow after the first stage.  The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 0.4%. We discount the terminal cash flows to today's value at a cost of equity of 6.3%. </p><p><strong>Terminal Value (TV)</strong>= FCF<sub>2034</sub> × (1 + g) ÷ (r – g) = JP¥10b× (1 + 0.4%) ÷ (6.3%– 0.4%) = JP¥177b</p><p><strong>Present Value of Terminal Value (PVTV)</strong>= TV / (1 + r)<sup>10</sup>= JP¥177b÷ ( 1 + 6.3%)<sup>10</sup>= JP¥96b</p><p> The total value, or equity value, is then the sum of the present value of the future cash flows,  which in this case is JP¥147b.  In the final step we divide the equity value by the number of shares outstanding.  Compared to the current share price of JP¥3.9k, the company appears   around fair value    at the time of writing.   Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind. </p><figure><img height="760" src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/23110030-dcf-1-dark-2/1749692519459?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="1706" original-src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/23110030-dcf-1-dark-2/1749692519459"/><figcaption>TSE:3097 Discounted Cash Flow June 12th 2025</figcaption></figure> <h2> Important Assumptions </h2><p> We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows.  You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them.  The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance.  Given that we are looking at Monogatari as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt.  In this calculation we've used 6.3%, which is based on a levered beta of 1.118. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. </p> <p><span> View our latest analysis for Monogatari </span></p><h3>SWOT Analysis for Monogatari</h3><div><div><p><strong>Strength</strong></p><ul><li>Earnings growth over the past year exceeded the industry.</li></ul> <ul><li>Debt is not viewed as a risk.</li></ul> <ul>Balance sheet summary for 3097.</ul> </div><div><p><strong>Weakness</strong></p><ul><li>Earnings growth over the past year is below its 5-year average.</li></ul> <ul><li>Dividend is low compared to the top 25% of dividend payers in the Hospitality market.</li></ul> <ul><li>Expensive based on P/E ratio and estimated fair value.</li></ul> </div><div><p><strong>Opportunity</strong></p><ul><li>Annual earnings are forecast to grow faster than the Japanese market.</li></ul> </div><div><p><strong>Threat</strong></p><ul><li>Revenue is forecast to grow slower than 20% per year.</li></ul> <ul> What else are analysts forecasting for 3097?</ul> </div></div> <h2> Moving On: </h2><p> Whilst important, the DCF calculation  is only one of many factors that you need to assess for a company.  DCF models are not the be-all and end-all of investment valuation.  Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation.  If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different.  For Monogatari, we've compiled three  further  aspects  you should further examine: </p><ol> <li><strong>Financial Health</strong>: Does 3097 have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.</li> <li><strong>Future Earnings</strong>: How does 3097's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.</li><li> <strong>Other Solid Businesses</strong>: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! </li> </ol><p>PS. Simply Wall St updates its DCF calculation for every Japanese stock every day, so if you want to find the intrinsic value of any other stock just search here.</p></div></div>

3097

<p>The fair value of Monogatari Corporation (TSE:3097) is estimated at JP¥3,807, closely aligning with its current share price of JP¥3,905. This valuation is 19% lower than the analyst price target of JP¥4,713. The analysis employs a two-stage Discounted Cash Flow (DCF) model, projecting future cash flows and discounting them to present value. The total equity value is calculated at JP¥147 billion, suggesting the stock is trading at fair value. Key assumptions include a discount rate of 6.3% and consideration of future cash flows, though the DCF model has its limitations.</p>

Calculating The Fair Value Of The Monogatari Corporation (TSE:3097)