<div id="readability-page-1"><div><h3>Key Insights</h3><ul><li> Using the 2 Stage Free Cash Flow to Equity, ASKA Pharmaceutical HoldingsLtd fair value estimate is JP¥2,994 </li> <li> ASKA Pharmaceutical HoldingsLtd's JP¥2,498 share price indicates it is trading at similar levels as its fair value estimate </li> <li> Industry average discount to fair value of 26% suggests ASKA Pharmaceutical HoldingsLtd's peers are currently trading at a higher discount  </li> </ul><p>How far off is ASKA Pharmaceutical Holdings Co.,Ltd. (TSE:4886) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced  by taking the expected future cash flows and discounting them to their present value.  Our analysis will employ the Discounted Cash Flow (DCF) model.  Don't get put off by the jargon, the math behind it is actually quite straightforward.</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.  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 Model </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) estimate </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¥1.95b</td><td>JP¥4.28b</td><td>JP¥4.70b</td><td>JP¥5.11b</td><td>JP¥4.50b</td><td>JP¥4.13b</td><td>JP¥3.90b</td><td>JP¥3.76b</td><td>JP¥3.67b</td><td>JP¥3.62b</td></tr><tr><td><strong>Growth Rate Estimate Source</strong></td><td>Analyst x1</td><td>Analyst x1</td><td>Analyst x1</td><td>Analyst x1</td><td>Analyst x1</td><td>Est @ -8.11%</td><td>Est @ -5.50%</td><td>Est @ -3.67%</td><td>Est @ -2.39%</td><td>Est @ -1.49%</td></tr><tr><td><strong> Present Value (¥, Millions) Discounted @ 4.8% </strong></td><td>JP¥1.9k</td><td>JP¥3.9k</td><td>JP¥4.1k</td><td>JP¥4.2k</td><td>JP¥3.6k</td><td>JP¥3.1k</td><td>JP¥2.8k</td><td>JP¥2.6k</td><td>JP¥2.4k</td><td>JP¥2.3k</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¥31b</p><p> We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period.  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 4.8%. </p><p><strong>Terminal Value (TV)</strong>= FCF<sub>2035</sub> × (1 + g) ÷ (r – g) = JP¥3.6b× (1 + 0.6%) ÷ (4.8%– 0.6%) = JP¥87b</p><p><strong>Present Value of Terminal Value (PVTV)</strong>= TV / (1 + r)<sup>10</sup>= JP¥87b÷ ( 1 + 4.8%)<sup>10</sup>= JP¥54b</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¥85b.  The last step is to then divide the equity value by the number of shares outstanding.  Compared to the current share price of JP¥2.5k, the company appears   about fair value    at a 17% discount to where the stock price trades currently.   Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. </p><figure><img height="760" src="https://imageproxy.pbkrs.com/https://images.simplywall.st/asset/chart/687135-dcf-1-dark-2/1769807486020?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/687135-dcf-1-dark-2/1769807486020"/><figcaption>TSE:4886 Discounted Cash Flow January 30th 2026</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 ASKA Pharmaceutical HoldingsLtd 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 4.8%, which is based on a levered beta of 0.800. 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 ASKA Pharmaceutical HoldingsLtd </span></p><h3>SWOT Analysis for ASKA Pharmaceutical HoldingsLtd</h3><div><div><p><strong>Strength</strong></p><ul><li>Debt is well covered by earnings.</li></ul> <ul>Balance sheet summary for 4886.</ul> </div><div><p><strong>Weakness</strong></p><ul><li>Earnings declined over the past year.</li></ul> <ul><li>Dividend is low compared to the top 25% of dividend payers in the Pharmaceuticals market.</li></ul></div><div><p><strong>Opportunity</strong></p><ul><li>Annual earnings are forecast to grow for the next 3 years.</li></ul> <ul><li> Current share price is below our estimate of fair value.</li></ul> </div><div><p><strong>Threat</strong></p><ul><li>Debt is not well covered by operating cash flow.</li></ul> <ul><li>Paying a dividend but company has no free cash flows.</li></ul> <ul>Is 4886 well equipped to handle threats?</ul> </div></div><h2> Looking Ahead: </h2><p> Valuation is only one side of the coin in terms of building your investment thesis, and it  shouldn't be the only metric you look at when researching 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.  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 ASKA Pharmaceutical HoldingsLtd, we've put together three  pertinent  items  you should consider: </p><ol> <li> <strong>Risks</strong>: Case in point, we've spotted  <strong> 2 warning signs for ASKA Pharmaceutical HoldingsLtd</strong>  you should be aware of.  </li> <li><strong>Future Earnings</strong>: How does 4886'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>

4886

<p>Using the 2 Stage Free Cash Flow to Equity model, ASKA Pharmaceutical Holdings Co., Ltd. (TSE:4886) has a fair value estimate of JP¥2,994, while its current share price is JP¥2,498, indicating it is trading close to its fair value. The analysis suggests that ASKA's peers are trading at a higher discount to fair value. The total equity value is estimated at JP¥85 billion, with a 17% discount compared to the current stock price. The DCF model highlights the importance of future cash flows and discount rates in valuation.</p>

Estimating The Fair Value Of ASKA Pharmaceutical Holdings Co.,Ltd. (TSE:4886)