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Subaru (TSE:7270): Assessing Valuation After Strong 22% Year-to-Date Share Price Performance

Simply Wall St · 2d ago

Subaru (TSE:7270) has quietly outperformed much of the auto sector this year, and recent trading suggests investors are reassessing what they are willing to pay for its steady earnings and improving margins.

See our latest analysis for Subaru.

That strength is not just a one week story. Subaru’s 22.44% year to date share price return and 41.36% one year total shareholder return point to momentum building as investors grow more comfortable with its earnings trajectory and valuation.

If Subaru’s move has you rethinking the whole sector, this could be a good moment to explore other auto names via our auto manufacturers.

With Subaru trading above analyst targets but still growing earnings and cash flow, investors face a key question: is the recent rally overextending the valuation, or is the market only beginning to price in its future growth?

Price-to-Earnings of 9.2x: Is it justified?

Subaru’s latest close at ¥3,369 equates to a price to earnings ratio of 9.2x, which screens as undervalued versus both peers and the broader market.

The price to earnings multiple compares what investors pay today for each unit of current earnings, a key benchmark for mature automakers with established profit histories. For Subaru, a 9.2x multiple suggests the market is not assigning a premium to its earnings power despite sustained profitability and a solid long term shareholder return profile.

Relative to the Japanese market average of 14.1x, Subaru trades at a clear discount. The gap is even wider against the Asian auto industry average of 18.9x and peer average of 13.4x. A fair price to earnings ratio of 14.6x from our fair ratio framework implies meaningful upside if sentiment toward Subaru’s earnings strength and consistency converges toward sector norms.

Explore the SWS fair ratio for Subaru

Result: Price-to-Earnings of 9.2x (UNDERVALUED)

However, Subaru still faces risks, including potential demand softness from higher rates and any renewed supply chain or regulatory pressures on global automakers.

Find out about the key risks to this Subaru narrative.

Another View: What Our DCF Model Says

While the price to earnings ratio points to value, our DCF model paints a cooler picture. On that basis, Subaru’s estimated fair value is ¥2,322.92, below the current ¥3,369 share price, which implies the stock appears overvalued rather than cheap. Which lens should investors trust?

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

7270 Discounted Cash Flow as at Dec 2025
7270 Discounted Cash Flow as at Dec 2025

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Subaru 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 899 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 Subaru Narrative

If you prefer to dig into the numbers yourself and challenge these assumptions, you can quickly craft a personalized view in just a few minutes: Do it your way.

A great starting point for your Subaru research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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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.