Tokyo Electron Device (TSE:2760) reported a net profit margin of 3.6%, down from 4.1% the previous year, as recent annual earnings slipped despite a five-year average earnings growth of 19.8%. Investors are weighing these short-term pressures against a solid near-term growth forecast, with earnings expected to rise 14.3% per year and revenue projected to increase 5.8% annually, both outpacing the broader Japanese market.
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TSE:2760 Earnings & Revenue History as at Oct 2025
Current net profit margin has slipped to 3.6%, down from last year’s 4.1%. This highlights near-term pressure, even after five years of averaging 19.8% annual earnings growth.
What is surprising is that, despite the dip in short-term margins, the projected 14.3% annual earnings growth and 5.8% annual revenue growth both outpace the broader Japanese market. This has led some investors to focus more on forward momentum than recent setbacks.
The company’s strong historical 19.8% average earnings growth adds weight to the view that recent margin weakness does not erase its structural strengths.
However, critics point to the negative growth in recent annual earnings as a reason for caution, noting that momentum needs to reassert itself quickly.
With a current Price-to-Earnings ratio of 12.5x, Tokyo Electron Device trades at a discount to both peer (13.7x) and Japanese electronic industry averages (15.2x). This is supported further by a trading price of ¥3,020 compared to a DCF fair value of ¥70,486.07.
Valuation-focused analysis suggests that current pricing balances both the negative impact from margin compression and optimism about future growth.
Bulls argue that the discount to sector and DCF fair value, trading at less than 5% of calculated fair value, provides a margin of safety for new investors.
On the other hand, critics of the valuation point to ongoing risks around dividend sustainability and the financial position, suggesting the downside is already reflected in the valuation gap.
The most prominent risks identified center on the sustainability of the dividend and the company’s overall financial position. These concerns counterbalance optimism about profit and revenue growth.
Bearish interpretations highlight that despite high historical earnings growth and strong valuation support, worries about dividends and financial health remain focal points for skepticism.
Bears argue that, unless addressed, these concerns could limit how quickly the market rewards any recovery in margins or growth rates.
Yet, the company’s ongoing profit and revenue expansion offers a direct counterpoint, pushing some to downplay the severity of the risk factors relative to peers.
Story Continues
Don’t just look at this quarter; the real story is in the long-term trend. We’ve done an in-depth analysis on Tokyo Electron Device’s growth and its valuation to see if today’s price is a bargain. Add the company to your watchlist or portfolio now so you don’t miss the next big move.
Despite Tokyo Electron Device’s solid history, recent profit margin compression and ongoing worries about dividend sustainability and financial strength may give investors pause.
If you’d like to focus on companies with healthier financial foundations and fewer balance sheet concerns, check out solid balance sheet and fundamentals stocks screener (1981 results) now.
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.
Companies discussed in this article include 2760.T.
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