It’s been a sad week for The Japan Steel Works, Ltd. (TSE:5631), who’ve watched their investment drop 15% to JP¥7,863 in the week since the company reported its annual result. Results look mixed – while revenue fell marginally short of analyst estimates at JP¥275b, statutory earnings were in line with expectations, at JP¥261 per share. Earnings are an important time for investors, as they can track a company’s performance, look at what the analysts are forecasting for next year, and see if there’s been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
After the latest results, the five analysts covering Japan Steel Works are now predicting revenues of JP¥308.3b in 2027. If met, this would reflect a meaningful 12% improvement in revenue compared to the last 12 months. Per-share earnings are expected to step up 12% to JP¥292. Yet prior to the latest earnings, the analysts had been anticipated revenues of JP¥308.6b and earnings per share (EPS) of JP¥304 in 2027. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
View our latest analysis for Japan Steel Works
The consensus price target held steady at JP¥12,370, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Japan Steel Works analyst has a price target of JP¥13,000 per share, while the most pessimistic values it at JP¥11,000. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Japan Steel Works’ growth to accelerate, with the forecast 12% annualised growth to the end of 2027 ranking favourably alongside historical growth of 6.7% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.8% per year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Japan Steel Works is expected to grow much faster than its industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Japan Steel Works. Fortunately, they also reconfirmed their revenue numbers, suggesting that it’s tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates – from multiple Japan Steel Works analysts – going out to 2029, and you can see them free on our platform here.
It is also worth noting that we have found 2 warning signs for Japan Steel Works (1 makes us a bit uncomfortable!) that you need to take into consideration.
New: Manage All Your Stock Portfolios in One Place
We’ve created the ultimate portfolio companion for stock investors, and it’s free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.