<div id="readability-page-1"><div><h3>Key Insights</h3><ul><li> Using the 2 Stage Free Cash Flow to Equity, Shiseido Company fair value estimate is JP¥3,614 </li> <li> Shiseido Company's JP¥2,345 share price signals that it might be 35% undervalued </li> <li>  The JP¥2,551 analyst price target for 4911 is 29% less than our estimate of fair value </li> </ul><p>In this article we are going to estimate the intrinsic value of Shiseido Company, Limited (TSE:4911) by taking the expected future cash flows and discounting them to their present value.  The Discounted Cash Flow (DCF) model is the tool we will apply to do this.  Believe it or not, it's not too difficult to follow, as you'll see from our example!</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.  Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. </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> Is Shiseido Company Fairly Valued? </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,  so we need to discount the sum of these future cash flows to arrive at a present value estimate: </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¥52.0b</td><td>JP¥57.0b</td><td>JP¥71.7b</td><td>JP¥76.6b</td><td>JP¥80.0b</td><td>JP¥82.6b</td><td>JP¥84.7b</td><td>JP¥86.3b</td><td>JP¥87.6b</td><td>JP¥88.7b</td></tr><tr><td><strong>Growth Rate Estimate Source</strong></td><td>Analyst x5</td><td>Analyst x4</td><td>Analyst x1</td><td>Analyst x1</td><td>Est @ 4.44%</td><td>Est @ 3.29%</td><td>Est @ 2.48%</td><td>Est @ 1.92%</td><td>Est @ 1.52%</td><td>Est @ 1.25%</td></tr><tr><td><strong> Present Value (¥, Millions) Discounted @ 6.1% </strong></td><td>JP¥49.0k</td><td>JP¥50.7k</td><td>JP¥60.0k</td><td>JP¥60.4k</td><td>JP¥59.5k</td><td>JP¥57.9k</td><td>JP¥55.9k</td><td>JP¥53.7k</td><td>JP¥51.4k</td><td>JP¥49.0k</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¥548b</p><p> After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage.  For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (0.6%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 6.1%. </p><p><strong>Terminal Value (TV)</strong>= FCF<sub>2035</sub> × (1 + g) ÷ (r – g) = JP¥89b× (1 + 0.6%) ÷ (6.1%– 0.6%) = JP¥1.6t</p><p><strong>Present Value of Terminal Value (PVTV)</strong>= TV / (1 + r)<sup>10</sup>= JP¥1.6t÷ ( 1 + 6.1%)<sup>10</sup>= JP¥896b</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¥1.4t.  To get the intrinsic value per share, we divide this by the total number of shares outstanding.  Relative to the current share price of JP¥2.3k, the company appears   quite good value    at a 35% discount to where the stock price trades currently.   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/409474-dcf-1-dark-2/1765063676472?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/409474-dcf-1-dark-2/1765063676472"/><figcaption>TSE:4911 Discounted Cash Flow December 6th 2025</figcaption></figure> <h2> The 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 Shiseido Company 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 6.1%, which is based on a levered beta of 1.049. 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 Shiseido Company </span></p><h3>SWOT Analysis for Shiseido Company</h3><div><div><p><strong>Strength</strong></p><ul><li>Debt is well covered by cash flow.</li></ul> <ul>Balance sheet summary for 4911.</ul> </div><div><p><strong>Weakness</strong></p><ul><li>Interest payments on debt are not well covered.</li></ul><ul><li>Dividend is low compared to the top 25% of dividend payers in the Personal Products market.</li></ul></div><div><p><strong>Opportunity</strong></p><ul><li>Expected to breakeven next year.</li></ul> <ul><li>Has sufficient cash runway for more than 3 years based on current free cash flows.</li></ul> <ul><li>Good value based on P/S ratio and estimated fair value.</li></ul> </div><div><p><strong>Threat</strong></p><ul><li>Paying a dividend but company is unprofitable.</li></ul> <ul> See 4911's dividend history.</ul> </div></div><h2> Looking Ahead: </h2><p> Although the valuation of a company is important, it  ideally won't be the sole piece of analysis you scrutinize for a company.  The DCF model is not a perfect stock valuation tool.  Instead the best use for a DCF model is to test certain assumptions and theories to see if they would lead to the company being undervalued or overvalued.  For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result.   Can we work out why the company is trading at a discount to intrinsic value?   For Shiseido Company, we've put together three  relevant  factors  you should further research: </p><ol> <li> <strong>Risks</strong>: We feel that you should assess the <strong>1 warning sign for Shiseido Company</strong> we've flagged before making an investment in the company. </li> <li><strong>Future Earnings</strong>: How does 4911'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. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the TSE every day. If you want to find the calculation for other stocks just search here.</p></div></div>

4911

<p>Shiseido Company (TSE:4911) is estimated to be 35% undervalued based on a DCF model, with a fair value of JP¥3,614 compared to its current share price of JP¥2,345. The analysis uses a 2-stage growth model to forecast future cash flows and discount them to present value. The intrinsic value per share suggests a significant discount, but valuations can vary based on assumptions and market conditions.</p>

Is There An Opportunity With Shiseido Company, Limited's (TSE:4911) 35% Undervaluation?