Internet Initiative Japan (TSE:3774) just announced it will become an authorized reseller of Starlink services in Japan, starting December 2025. The company will focus on corporate clients and supporting disaster response efforts.
See our latest analysis for Internet Initiative Japan.
IIJ’s Starlink partnership comes as the stock regains momentum, with a 1-month share price return of 9.4%, reversing earlier softness this year. Despite a modest 1-year total shareholder return of -1.2%, the company’s five-year total return of 144% highlights long-term value for patient investors. Recent news could also rekindle investor interest in its growth story.
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With recent momentum and bold moves like the Starlink partnership, is Internet Initiative Japan’s stock now trading below its true worth, or is the market already factoring in all the future growth ahead?
Price-to-Earnings of 24.1x: Is it justified?
At a glance, Internet Initiative Japan’s shares are trading at a price-to-earnings (P/E) ratio of 24.1x, making them notably more expensive than both peer companies and industry benchmarks. The latest close was ¥2,781.5, which does not look especially cheap compared to these comparison points.
The price-to-earnings ratio measures how much investors are willing to pay per yen of earnings. It is a popular measure for tech and telecom stocks where growth can drive high valuations. A higher multiple often signals expectations of stronger growth or quality, but it can also reflect market enthusiasm surpassing fundamentals.
For Internet Initiative Japan, the P/E of 24.1x stands out compared to the Asian Telecom industry average of 16.3x and a peer group average of just 14.6x. Additionally, the estimated fair P/E based on fundamentals is 19.7x, suggesting the current premium may not be fully justified. The market appears to be betting on outperformance, while the company’s earnings growth profile has not outpaced industry leaders recently.
Explore the SWS fair ratio for Internet Initiative Japan
Result: Price-to-Earnings of 24.1x (OVERVALUED)
However, sluggish year-to-date returns and uncertain net income trends could signal market caution, which may challenge the bullish outlook on Internet Initiative Japan.
Find out about the key risks to this Internet Initiative Japan narrative.
Another View: SWS DCF Model Points to Undervaluation
While the market assigns a premium based on earnings multiples, our DCF model tells a different story. According to its calculations, Internet Initiative Japan is trading nearly 50% below its fair value. This suggests much deeper upside than what a P/E ratio alone would imply. So, is the optimism warranted, or is this a classic value trap?
Look into how the SWS DCF model arrives at its fair value.
3774 Discounted Cash Flow as at Nov 2025
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Internet Initiative Japan 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 840 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.
Build Your Own Internet Initiative Japan Narrative
Not convinced by these figures or have your own perspective to add? Take a few minutes to dig into the numbers and shape your own story. Do it your way.
A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Internet Initiative Japan.
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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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