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    SMS (TSE:2175) Following Its Strong Run Is The Valuation Case Still There

    Simply Wall St·07/28/2026 17:19:53
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    SMS (TSE:2175) has drawn fresh attention after its recent share price move, with the stock now sitting around ¥2,352. Investors are weighing this shift against the company’s earnings profile and longer term returns.

    See our latest analysis for SMS.

    Over the past year, SMS has seen strong momentum in its share price, with a year to date share price return of 74.22%. However, the 5 year total shareholder return shows a decline of 20.98%, indicating a weaker longer term record.

    If SMS has caught your interest and you want to widen your search, now could be a good time to check out 10 top founder-led companies

    After a strong run in SMS shares, some investors may feel pressure to act quickly, while others prefer to wait and see. So does the current ¥2,352 level already reflect what you are paying for?

    Preferred Price-to-Sales of 3x: Is It Justified for SMS?

    On Simply Wall St’s metrics, SMS appears to trade at a discount to an estimated fair value based on future cash flows, with the current price of ¥2,352 compared to a DCF fair value estimate of ¥3,612.8. That implies the SWS DCF model sees the shares as undervalued at today’s level.

    The SWS DCF model projects SMS’s future cash flows and then discounts those back to today using an appropriate rate. This aims to capture what those future cash flows could be worth in present day terms and frames the current share price against that backdrop.

    For SMS, this kind of model can be useful because the company is currently loss making even though its revenue is growing, and earnings are forecast to improve over time. Rather than relying on current reported profits, the focus is on how the business might convert its position in nursing care and medical information services into future cash generation.

    Look into how the SWS DCF model arrives at its fair value.

    Result: DCF Fair value of ¥3,612.8 (UNDERVALUED)

    However, investors also need to weigh SMS’s recent losses and the weaker 3 and 5 year shareholder returns, which could challenge confidence if progress on profitability stalls.

    Find out about the key risks to this SMS narrative.

    Another View on SMS Using Sales Based Metrics

    While the SWS DCF model points to potential upside for SMS, the current P/S ratio of 3x tells a different story. It is higher than both the JP Professional Services industry average of 0.9x and the peer average of 2.4x, even though the fair ratio is estimated at 4.2x.

    This creates a mixed picture. On one hand, the current P/S sits below the fair ratio, which may suggest some room for the market to move closer to that level over time. On the other hand, SMS already trades at a premium to both its industry and peers. How comfortable are you paying above sector norms while the company is still loss making?

    See what the numbers say about this price — find out in our valuation breakdown.

    TSE:2175 P/S Ratio as at Jul 2026
    TSE:2175 P/S Ratio as at Jul 2026

    Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out SMS 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 20 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

    Next Steps

    If the mixed signals on SMS leave you unsure, that is normal for stocks with both setbacks and rewards in play. Consider your options while the details are still fresh in mind and weigh the upside factors highlighted in the 2 key rewards

    Looking for more investment ideas beyond SMS?

    Do not stop with SMS. Use the Simply Wall Street Screener to quickly spot other stocks that match the kind of risk and return profile you want.

    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.