<div id="readability-page-1"><div><h3>Key Insights</h3><ul><li> Using the 2 Stage Free Cash Flow to Equity, Kinden fair value estimate is JP¥5,312 </li> <li> Kinden is estimated to be 30% overvalued based on current share price of JP¥6,891 </li> <li> Our fair value estimate is 12% lower than Kinden's analyst price target of JP¥6,033 </li> </ul><p>Today we will run through one way of estimating the intrinsic value of Kinden Corporation (TSE:1944) by taking the expected future cash flows and discounting them to their present value.  This will be done using the Discounted Cash Flow (DCF) model.  Believe it or not, it's not too difficult to follow, as you'll see from our example!</p><p> We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios.  If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. </p><p>AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.</p><h2> The Calculation </h2> <p> We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate.  In the first stage we need to estimate the cash flows to the business over the next ten years.   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> A DCF is all about the idea that a dollar in the future is less valuable than a dollar today,  and so the sum of these future cash flows is then discounted to today's value: </p><h4> 10-year free cash flow (FCF) forecast </h4><table><tbody><tr><td> </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><td><strong>2035</strong></td></tr><tr><td><strong> Levered FCF (¥, Millions) </strong></td><td>JP¥14.7b</td><td>JP¥52.5b</td><td>JP¥57.5b</td><td>JP¥60.9b</td><td>JP¥63.6b</td><td>JP¥65.6b</td><td>JP¥67.3b</td><td>JP¥68.5b</td><td>JP¥69.6b</td><td>JP¥70.4b</td></tr><tr><td><strong>Growth Rate Estimate Source</strong></td><td>Analyst x4</td><td>Analyst x4</td><td>Analyst x4</td><td>Est @ 6.00%</td><td>Est @ 4.38%</td><td>Est @ 3.24%</td><td>Est @ 2.45%</td><td>Est @ 1.90%</td><td>Est @ 1.51%</td><td>Est @ 1.24%</td></tr><tr><td><strong> Present Value (¥, Millions) Discounted @ 6.5% </strong></td><td>JP¥13.8k</td><td>JP¥46.3k</td><td>JP¥47.6k</td><td>JP¥47.4k</td><td>JP¥46.5k</td><td>JP¥45.1k</td><td>JP¥43.4k</td><td>JP¥41.5k</td><td>JP¥39.6k</td><td>JP¥37.6k</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¥409b</p><p> We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period.  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 0.6%. We discount the terminal cash flows to today's value at a cost of equity of 6.5%. </p><p><strong>Terminal Value (TV)</strong>= FCF<sub>2035</sub> × (1 + g) ÷ (r – g) = JP¥70b× (1 + 0.6%) ÷ (6.5%– 0.6%) = JP¥1.2t</p><p><strong>Present Value of Terminal Value (PVTV)</strong>= TV / (1 + r)<sup>10</sup>= JP¥1.2t÷ ( 1 + 6.5%)<sup>10</sup>= JP¥644b</p><p> The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value,  which in this case is JP¥1.1t.  The last step is to then divide the equity value by the number of shares outstanding.  Relative to the current share price of JP¥6.9k, the company appears   slightly overvalued    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/880745-dcf-1-dark-2/1765667243837?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/880745-dcf-1-dark-2/1765667243837"/><figcaption>TSE:1944 Discounted Cash Flow December 13th 2025</figcaption></figure> <h2> Important Assumptions </h2><p> Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows.  Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions.  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 Kinden 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 6.5%, which is based on a levered beta of 1.119. 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> See our latest analysis for Kinden </span></p><h3>SWOT Analysis for Kinden</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 1944.</ul> </div><div><p><strong>Weakness</strong></p><ul><li>Dividend is low compared to the top 25% of dividend payers in the Construction 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 for the next 3 years.</li></ul> </div><div><p><strong>Threat</strong></p><ul><li>Dividends are not covered by cash flow.</li></ul> <ul><li> Annual earnings are forecast to grow slower than the Japanese market.</li></ul> <ul> See 1944's dividend history.</ul> </div></div><h2> Moving On: </h2><p> Whilst important, the DCF calculation  shouldn't be the only metric you look at when researching a company.  DCF models are not the be-all and end-all of investment valuation.  Rather it should be seen as a guide to &#34;what assumptions need to be true for this stock to be under/overvalued?&#34;  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.   Can we work out why the company is trading at a premium to intrinsic value?   For Kinden, we've compiled three  additional  factors  you should further examine: </p><ol> <li> <strong>Risks</strong>: As an example, we've found <strong>1 warning sign for Kinden</strong> that you need to consider before investing here. </li> <li><strong>Future Earnings</strong>: How does 1944'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 High Quality Alternatives</strong>: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! </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><p>Mobile Infrastructure for Defense and Disaster</p><p>The next wave in robotics isn't humanoid. Its fully autonomous towers delivering 5G, ISR, and radar in under 30 minutes, anywhere.</p><p>Get the investor briefing before the next round of contracts</p><p><span>Sponsored On Behalf of CiTech</span></p></div></div></div>

1944

<p>Kinden Corporation (TSE:1944) is estimated to be 23% overvalued based on its current share price of JP¥6,891, with a fair value of JP¥5,312 using the Discounted Cash Flow model. The analysis highlights the importance of considering future cash flows and discount rates, while noting the limitations of DCF in accounting for industry cyclicality and capital requirements. Investors are encouraged to conduct their own evaluations of the company's future performance.</p>

Kinden Corporation's (TSE:1944) Intrinsic Value Is Potentially 23% Below Its Share Price