Is TISI (TSE:3626) Undervalued As It Weighs A Back Office Company Split?

TISI (TSE:3626) has scheduled a board meeting on 24 July 2026 to review a proposal that would shift certain back-office operations to a wholly owned subsidiary through an absorption-type company split effective 1 October 2026.

See our latest analysis for TISI.

The coming company split discussion lands while TISI’s 1 month share price return of 21.69% and 7 day share price return of 6.92% contrast with a year to date share price decline of 27.49%, and a 5 year total shareholder return of 39.91% that points to a stronger longer run record.

If this kind of restructuring story interests you, it can be worth seeing what else is moving and reviewing 10 top founder-led companies

TISI’s recent rebound and the planned back office company split leave you weighing two paths. Is the current valuation already reflecting this shift, or does it still make sense to wait for a cleaner entry point as fundamentals stack up next to the price chart?

Price to earnings for TISI: is the premium justified?

TISI last closed at ¥3,754 and currently trades on a P/E of 16.9x. That is slightly above the JP IT industry average P/E of 15.9x, so the stock is not priced at a discount when only looking at earnings against the wider sector.

The P/E ratio compares TISI’s share price to its earnings per share, which helps you see how much investors are paying for each unit of current profit. For an IT services company with operations focused on Japan and exposure across financial, industrial and outsourcing segments, this matters because earnings quality, growth expectations and dividend support can all influence how much of a premium or discount the market is willing to pay.

There are a few moving parts behind that 16.9x P/E. Analysts expect earnings to grow 7% per year, which is slower than the broader JP market forecast of 10.1% and below the 20% threshold that would signal very rapid profit expansion. Recent net profit margins of 7.8% are also lower than last year’s 8.7%, and return on equity of 14.4% is described as low relative to a 20% benchmark. On the other hand, the stock is described as having high quality earnings, trades at a P/E that is below the estimated fair P/E of 20.8x, and is also seen as good value compared with a 22.1x peer average P/E. That combination suggests the current multiple sits below a level the market could potentially migrate toward if those quality and growth characteristics remain intact.

Viewed against the industry, TISI looks slightly expensive compared with the JP IT sector average of 15.9x, yet cheaper than the peer group average P/E of 22.1x and below an estimated fair P/E of 20.8x. That positions the stock in a middle ground where the market is not assigning a deep discount to its earnings, but also is not pushing it into the higher valuation bracket that some peers command.

Explore the SWS fair ratio for TISI

Result: Price-to-earnings of 16.9x (ABOUT RIGHT)

However, TISI still faces risks if the back office split complicates execution or if revenue growth of 3.7% and net income growth of 7% lose momentum.

Find out about the key risks to this TISI narrative.

Another view on TISI’s value

The P/E discussion suggests TISI is somewhere in the middle of the pack. Our DCF model points in a different direction. At ¥3,754 the stock is described as trading about 28% below an estimated future cash flow value of ¥5,242.42, which frames today’s price as a potential discount. Could the cash flow view be seeing something the earnings multiple does not?

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

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out TISI 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

The mix of signals around TISI can feel conflicting, so it helps to move quickly and weigh the hard data yourself before sentiment shifts again. To see what the market currently views as potential positives for the company, review the 3 key rewards

Looking for more investment ideas beyond TISI?

If you stop with TISI, you might miss other opportunities that fit your style and risk tolerance. Use the screeners below to sharpen your next move.

• Target resilient companies that aim to protect your downside by checking out 61 resilient stocks with low risk scores as a starting point for lower volatility ideas.
• Hunt for potential value opportunities by scanning 20 high quality undervalued stocks and compare fundamentals before you commit fresh capital.
• Focus on income and stability by reviewing 39 dividend fortresses and see which stocks line up with your dividend goals.

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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