Should You Consider Hitachi After a 24% Jump and Major AI Expansion News?

Thinking about what to do with Hitachi stock right now? You are not alone. After an eye-popping 23.8% jump over the past month and a strong 8.5% climb in just the past week, many investors are taking notice. The company’s five-year return of 637.1% has been nothing short of remarkable, and even over the last year, the stock is up 18.3%. A lot of this long-term momentum is thanks to Hitachi’s strategic moves in digital infrastructure and smart manufacturing, which have caught the eye of both institutional and individual investors looking for resilience and innovation in Japan’s blue chip names.

What is fueling this fresh burst in price action? Recent headlines spotlight Hitachi’s expansion in artificial intelligence-driven automation across rail, energy, and industrial sectors. These moves have bolstered perceptions about Hitachi’s growth potential and helped recast its image from a traditional conglomerate to a modern, data-centered powerhouse.

But are shares undervalued after such dramatic gains? That is where things get interesting. By our latest assessment, which looks at six common valuation checks, Hitachi is undervalued based on just one of them. This gives the company a value score of 1 out of 6. It is a mixed picture, and you would be right to wonder if now is the moment to buy, hold, or move on.

Let’s break down these different valuation methods, examine what each tells us (and what they might miss), and, by the end, explore one key factor you should not overlook when sizing up Hitachi for your portfolio.

Hitachi scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Hitachi Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates what a company is worth today by forecasting all its future cash flows and then discounting them back to the present. In Hitachi's case, analysts and in-house estimates project the company's Free Cash Flow (FCF) in the years ahead, all denominated in Japanese Yen (¥).

Currently, Hitachi's last twelve months Free Cash Flow is about ¥1.09 trillion, or ¥1,086.5 billion. Analyst consensus provides forecasts for the next five years, after which the estimates are extrapolated by Simply Wall St. According to these projections, Hitachi's FCF is expected to reach roughly ¥819.0 billion by 2030. These projections are derived from a two-stage Free Cash Flow to Equity model, capturing both forecasted and terminal FCF periods.

Based on this methodology, the DCF model calculates an estimated intrinsic value of ¥3,907.69 per share. However, this is 24.1% lower than the stock’s current market price. This suggests the shares are significantly overvalued by this approach.

Story Continues

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Hitachi.6501 Discounted Cash Flow as at Oct 2025

Our Discounted Cash Flow (DCF) analysis suggests Hitachi may be overvalued by 24.1%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Hitachi Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies because it lets investors quickly compare what the market is willing to pay for each unit of earnings. It is especially useful for established businesses like Hitachi, where consistent profits make the PE ratio a meaningful indicator of market expectations.

While a higher PE ratio can signal investor optimism over future growth prospects, it can also reveal increased risk or inflated expectations. Conversely, a lower PE may suggest undervaluation or reflect concerns about earnings stability. What is considered a “normal” PE for a stock depends on the company’s growth potential and its risk profile relative to the market and peers.

At the moment, Hitachi trades at a PE of 34.8x, which stands well above the Industrials industry average of 12.8x and also outpaces the peer group average of 15.0x. This premium suggests that investors are willing to pay extra for Hitachi’s earnings, likely factoring in its innovation and recent growth runway.

To sharpen this comparison, Simply Wall St calculates a proprietary "Fair Ratio" for each stock. For Hitachi, the Fair Ratio is 38.7x, which blends its earnings growth outlook, profit margins, business risks, size, and industry dynamics. This makes it a more tailored benchmark than a plain industry comparison can offer. Because it accounts for so many unique company traits, the Fair Ratio may reveal cases where a stock’s higher PE is actually justified.

Comparing Hitachi’s current PE (34.8x) with its Fair Ratio (38.7x), there is only a modest gap, suggesting the stock is broadly in line with the fundamentals implied by its outlook and performance.

Result: ABOUT RIGHTTSE:6501 PE Ratio as at Oct 2025

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Hitachi Narrative

Earlier we mentioned there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your personal investment story. It connects what you believe about Hitachi’s future (the company’s opportunities, risks, and direction) to a clear financial forecast and an estimate of fair value.

Narratives make your analysis intuitive. Instead of just looking at numbers, you recall why a fair value makes sense, what could realistically drive growth, and what might get in the way. On Simply Wall St’s Community page, millions of investors already use Narratives to explain their assumptions for future revenue, earnings, and profit margins alongside a transparent price target.

With Narratives, deciding whether to buy or sell becomes more objective. You continuously compare your fair value (driven by your Narrative) to the current share price to spot opportunities and risks. Plus, since Narratives update live whenever new news or earnings results are released, your perspective always stays relevant.

For Hitachi, some investors see accelerating digital growth and grid modernization propelling earnings above ¥999.4 billion by 2028 and estimate fair value above ¥5,300, while others remain cautious about competition and project costs, sticking with conservative targets around ¥3,900. This shows just how differently the story can unfold depending on your Narrative.

Do you think there's more to the story for Hitachi? Create your own Narrative to let the Community know!TSE:6501 Community Fair Values as at Oct 2025

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 6501.T.

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