---
endpoint: analytics
pattern: Technology
status: done
latency_ms: 251851
conversation_id: 641aae9a-809d-4adf-93a2-c5ad05f6ed69
citations: 13
created: 2026-05-31 20:36:48Z
---

# How does Nintendo’s valuation compare to peers, and what justifies its premium/discount?

# Nintendo Valuation vs Peers — Premium or Discount?

**Short answer:** Today (31 May 2026) Nintendo trades on **NTM P/E 18.4x and EV/EBITDA 14.9x [12]** — a sharp **discount** to both its own 5-year averages (23.0x / 17.0x) and to its core Japanese first-party games peers (Capcom, Konami, Square Enix, Bandai Namco), but a **premium** to platform-owner Sony and to consumer-toy/games hybrids (Sega Sammy, Take-Two ex-growth). The discount is the market pricing in a disappointing Switch 2 cycle. As recently as a year ago (June 2025) Nintendo traded at **FY1 PE 44.2x — a ~47% premium to the peer median 30.1x** — and CLSA argued that premium was unjustified [1][2].

---

## 1. Where Nintendo Trades Today (May 2026)

Post Q4 FY3/26 (reported 8 May 2026), Nintendo shares fell **–8.4% on the print** and hit fresh 52-week lows at **¥6,873–7,083, down ~39% YoY**, after FY3/27 OP guidance came in softer than the already-lowered Street view [12][13]. Switch 2 launch momentum was weaker than expected, planned hardware price hikes raised demand-elasticity concerns, and memory/tariff cost inflation hit margins [12].

| Metric | Nintendo (current) | 5-Yr Avg | 5-Yr High | 5-Yr Low |
|---|---|---|---|---|
| **NTM P/E** | **18.4x** | 23.0x | 63.0x | 10.0x [12] |
| **EV/EBITDA** | **14.9x** | 17.0x | 30.0x | 10.0x [12] |
| Sell-side avg TP | ¥11,606 (+65% upside, 71% Buy) [12] | | | |

Nintendo is trading at the **bottom quartile of its own 5-year range** — not a premium asset at the moment, by its own history.

---

## 2. CLSA's Peer Matrix — the Reference Point (5 Jun 2025, U-PF)

CLSA's June 2025 "Switch over" note (when shares were ¥12,090, vs ¥7,055 today) captured Nintendo right at the peak premium, just before the de-rating. The peer comp [1]:

| Company | Ticker | Country | Rec | Mkt Cap (US$bn) | **PE FY1** | PB FY1 | Div Yld | ROE | EPS Gr. |
|---|---|---|---|---|---|---|---|---|---|
| **Nintendo** | **7974** | **JP** | **U-PF** | **110.0** | **44.2x** | **5.0x** | **1.1%** | **11.5%** | **14.2%** |
| Bandai Namco | 7832 | JP | O-PF | 21.2 | 23.2x | 4.3x | 1.7% | 18.6% | 31.0% |
| Capcom | 9697 | JP | O-PF | 16.3 | 32.8x | 6.7x | 1.1% | 22.4% | 14.9% |
| Konami | 9766 | JP | O-PF | 20.3 | 34.8x | 5.6x | 0.9% | 17.1% | 33.0% |
| Square Enix | 9684 | JP | HLD | 7.7 | 33.1x | 3.1x | 1.5% | 9.5% | 32.9% |
| Sega Sammy | 6460 | JP | HC O-PF | 4.5 | 14.1x | 1.5x | 2.1% | 11.1% | (2.2%) |
| Sony Group | 6758 | JP | O-PF | 165.8 | 25.2x | 2.6x | 0.6% | 10.7% | (19.5%) |
| CyberAgent | 4751 | JP | O-PF | 5.4 | 27.5x | 4.3x | 1.3% | 16.7% | 75.9% |
| DeNA | 2432 | JP | HLD | 2.3 | 42.2x | 1.5x | 0.7% | 3.5% | n/m |
| Electronic Arts | EA | US | N-R | 36.7 | 18.0x | 6.0x | 0.5% | 27.2% | 35.2% |
| Microsoft | MSFT | US | N-R | 3,441.0 | 34.8x | 10.1x | 0.7% | 32.4% | 13.1% |
| Take-Two | TTWO | US | N-R | 41.9 | 86.4x | 20.1x | 0.0% | 21.7% | 4.0% |
| **Peer Average** | | | | | **32.9x** | **5.2x** | 1.2% | 15.3% | 14.2% |
| **Peer Median** | | | | | **30.1x** | **4.3x** | 1.1% | 14.1% | 14.2% |

**Key reading of this matrix:**
- At ¥12,090, Nintendo's **44.2x FY1 PE** sat ~47% above the peer median (30.1x) and ~34% above the average (32.9x) — a clear **premium** [1].
- Critically, Nintendo's premium PE coexisted with the **lowest ROE in the first-party Japanese games cluster** (11.5% vs Capcom 22.4%, Bandai 18.6%, Konami 17.1%) [1] — i.e., investors were paying a top multiple for sub-peer-group returns.
- The PE was a near-trough-cycle distortion: FY3/25 EPS had collapsed –43% on the legacy Switch wind-down, so the headline 44.2x was a "denominator problem," not a true through-cycle multiple. CLSA's preferred lens is the PE applied to **peak (FY3/28) EPS**, which gives an "adjusted" multiple closer to peers but still demanding given execution risk.

---

## 3. What Justifies (or Doesn't Justify) Nintendo's Premium

### Premium-justifying factors (the bull case)
1. **IP franchise depth.** Mario, Zelda, Pokémon (associate), Donkey Kong, Splatoon, Animal Crossing — "one of the premier IP lineups of any company globally" [4]. Investors pay an "IP optionality" premium because Nintendo can monetize beyond the console (theme parks, the Super Mario Bros. Movie franchise, merch).
2. **Platform monopoly economics.** As the sole hardware-and-software gatekeeper for its ecosystem, Nintendo captures both razor and razorblade economics — unlike Square Enix/Capcom/EA/TTWO, who must pay platform fees to Sony/Microsoft/Nintendo/Steam.
3. **Fortress balance sheet.** Net-debt/equity of **–67.3%** (massive net cash) [1] is the largest in the peer group apart from a few small caps — gives downside cushion via book-value support.
4. **Catalyst optionality.** New platform launches, mobile monetization, China penetration, movie-IP expansion (Super Mario Bros. Movie, Zelda film), theme parks — none of which are in CLSA's base case but each carries upside option-value [11].

### Why CLSA argued the premium was NOT justified
1. **The PE is being applied to depressed earnings.** The 44.2x headline was on FY3/25 trough EPS (¥239.6). CLSA's target was set by applying **20.1x — the 10-year adjusted-average PE — to peak FY3/28 EPS (¥425.9)** [3]. That implied ¥8,561 ≈ ¥8,600, a 29% downside from June 2025's ¥12,090 [3][2]. The market's effective price was therefore "paying 44x on trough or ~28x on peak" — both elevated relative to history when overlaid on execution risk.
2. **ROE materially below peers.** 11.5% ROE vs ~17–22% for Capcom/Bandai/Konami [1] — Nintendo's hardware-heavy cost base structurally drags returns vs software-pure-play peers. A higher PE on lower ROE is the inverse of what fundamentals justify.
3. **Single-platform concentration risk.** The shift to a single hybrid platform (vs the old dual console+handheld model) means "Nintendo will need to flawlessly execute on its product concept, software support and social strategy" [4]. Execution risk is binary and asymmetric — a misstep is uncoverable, success only normalizes the multiple.
4. **Cyclical down-leg + tariff/yen overhang.** Nintendo is a "classic Japanese exporter with costs predominantly in yen and revenues in foreign currencies" [11] — yen strength compresses margins, and the Switch downcycle was set to weigh on profits through CY24 [11].
5. **Sector backdrop.** As of CLSA's late-May 2025 Japan Forum, investors were already telegraphing rotation OUT of premium-multiple stalwarts (Capcom, Konami, Nintendo) and INTO discounted plays like Sega Sammy [5] — the market was crowding-out, not crowding-in, the premium-multiple thesis.

---

## 4. How CLSA Frames Peer Multiples — What's "Allowed"

CLSA explicitly assigns **premium multiples** only where ROE and execution support them. The internal framework (gleaned from coverage notes):

| Stock | Target Multiple | Justification CLSA cites |
|---|---|---|
| **Bandai Namco** | 25.3x FY3/27 PE (15% premium to 10-yr adj avg high) | "Consistent track record of profitability"; "IP-driven toys business" [7] |
| **Capcom** | 30.4x FY3/27 PE (15% premium to 10-yr avg of highs) | "Strong fundamentals, increasing competitiveness in overseas markets, exceptional growth outlook…**ROE that is double that of its domestic peer group**" [8] — explicitly a quality/ROE premium |
| **Sega Sammy** | 17.2x FY3/27 PE (10% premium to 10-yr adj avg high) | "Trading at steep valuation discounts to its video game peers" [9] — premium relative to its own history but discount vs cohort |
| **Nintendo** | 20.1x FY3/28 PE (10-yr adjusted **average**, NOT a premium) | Cyclical risk and "overblown expectations" cap the multiple; no quality premium awarded [2][3] |
| **Capcom (thesis)** | "A valuation premium for the company is warranted but also puts pressure on the company in terms of product pipeline and execution" [10] | Same logic CLSA applies inversely to Nintendo |

The clearest framework signal: **CLSA gives Capcom a 15% premium-to-history multiple because of double-peer-group ROE; it gives Nintendo only a flat 10-yr average multiple because the ROE doesn't support a premium and the cycle is going the wrong way.**

---

## 5. Sanity-Check Against Today (May 2026)

CLSA's June 2025 thesis has substantively played out. Nintendo shares have fallen from **¥12,090 → ~¥7,055 (–42% in ~11 months)** [12][13], blowing through CLSA's ¥8,600 target on the downside. The de-rating brought Nintendo to **18.4x NTM P/E** [12] — i.e., the stock is no longer at a premium to peers but trading at a discount even to its own history. The Street is now overwhelmingly Buy-rated (71%) with an average target of ¥11,606 (+65% upside) [12], implying consensus has flipped from "expensive" to "cyclical bottom + Switch 2 ramp upside." Nomura cut its TP from ¥14,900 → ¥11,900 but kept Buy; Goldman maintains Buy at ¥10,500; Morgan Stanley holds at ¥10,000 EW [12].

**Bottom line:** The valuation question has inverted in 12 months. A year ago, the debate was "why is Nintendo at a premium?" — and CLSA argued the premium was undeserved given low ROE, single-platform concentration, and cycle risk [1][2][4]. Today, the debate is "why is Nintendo at a discount?" — and the consensus answer is that the Switch 2 cycle has disappointed harder than priced in, but IP durability and the cash fortress (+net-cash) should limit further downside and provide leverage if software cadence improves [12].

---

**Sources**
[1] CLSA — Nintendo (U-PF "Switch over"), 5 Jun 2025, Peer/customer matrix
[2] CLSA — Nintendo (U-PF "Switch over"), 5 Jun 2025, Valuation details
[3] CLSA — Nintendo (U-PF "Switch over"), 5 Jun 2025, Share-price target calculation
[4] CLSA — Nintendo (U-PF "Switch over"), 5 Jun 2025, Investment thesis
[5] CLSA — Japan games & leisure (JF25), 30 May 2025, "Elevated peer group valuations drawing interest to Sega Sammy"
[6] CLSA — Bandai Namco (O-PF), 12 Jun 2025, Peer/customer matrix
[7] CLSA — Bandai Namco (O-PF), 12 Jun 2025, Valuation details
[8] CLSA — Japan games & leisure (JF25), 30 May 2025, Capcom valuation details
[9] CLSA — Japan games & leisure (JF25), 30 May 2025, Sega Sammy valuation details
[10] CLSA — Japan games & leisure (JF25), 30 May 2025, Capcom investment thesis
[11] CLSA — Nintendo (U-PF "Switch over"), 5 Jun 2025, Catalysts
[12] StreetAccount — Street Takeaways: Nintendo Q4 earnings, 12 May 2026
[13] StreetAccount — Japan Stocks reaching new 52-week highs/lows, 14 May 2026

## Citations

- [1] **607961340LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961340LinqAlpha.PDF>
- [2] **607961340LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961340LinqAlpha.PDF>
- [3] **607961340LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961340LinqAlpha.PDF>
- [4] **607961340LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961340LinqAlpha.PDF>
- [5] **607960905LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960905LinqAlpha.PDF>
- [6] **607961870LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961870LinqAlpha.PDF>
- [7] **607961870LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961870LinqAlpha.PDF>
- [8] **607960905LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960905LinqAlpha.PDF>
- [9] **607960905LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960905LinqAlpha.PDF>
- [10] **607960905LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960905LinqAlpha.PDF>
- [11] **607961340LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961340LinqAlpha.PDF>
- [12] **Street Takeaways - Nintendo Q4 earnings** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4671968&_doc_date=2026-05-12&_doc_product=SA>
- [13] **StreetAccount Summary: Japan Stocks reaching new 52-week highs/lows** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4679450&_doc_date=2026-05-14&_doc_product=SA>

