Kyujin Box's Marketing And Tabelog's Promotions Will Fuel Future Success

Key Takeaways

• Strategic mass advertising for Kyujin Box suggests ambitious growth, potentially increasing market share and revenue despite upfront costs.
  
• Planned M&A activities aim to diversify revenue streams, potentially stabilizing earnings and offsetting low growth in real estate and travel segments.
  
• Decreased efficiency and higher costs in several business areas may impede revenue growth and long-term capital allocation strategies, necessitating improvements or new developments.

Catalysts

Engages in the provision of purchase support, restaurant review, and other services in Japan.

• Continued growth in Kakaku.com's advertising business, with promising results during peak sales seasons, may drive further revenue increases and improve net margins due to more efficient advertising operations.
  
• Tabelog's 20th-anniversary brand promotion is expected to enhance brand visibility and attract more restaurant partners, potentially boosting future revenue and earnings despite the temporary increase in expenses.
  
• Kyujin Box's significant revenue growth, driven by enhanced marketing and a strengthened sales structure, is likely to support stronger top-line growth even with current challenges in maintaining high acquisition ad efficiency.
  
• Strategic mass advertising for Kyujin Box suggests an ambitious growth approach, which could expand market share and long-term revenue, enhancing overall earnings potential despite upfront costs.
  
• Planned M&A activities to grow the Incubation segment signify potential diversification and new revenue streams, potentially offsetting low growth rates in real estate and travel domains, enhancing future revenue and earnings stability.

Kakaku.com Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Kakaku.com's revenue will grow by 9.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 27.4% today to 28.0% in 3 years time.
• Analysts expect earnings to reach ¥27.8 billion (and earnings per share of ¥146.47) by about February 2028, up from ¥20.5 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ¥24.9 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.7x on those 2028 earnings, up from 22.2x today. This future PE is about the same as the current PE for the JP Interactive Media and Services industry at 22.7x.
• Analysts expect the number of shares outstanding to grow by 0.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.87%, as per the Simply Wall St company report.

Kakaku.com Future Earnings Per Share Growth

Risks

• The slowdown in growth for the personal finance category within the service business could negatively impact overall revenue growth if not addressed.
  
• A slight decrease in profit margin for Tabelog due to onetime expenses from a point campaign highlights the risk of increased operational costs impacting net margins.
  
• The efficiency of acquisition ads for Kyujin Box declined, which could lead to increased customer acquisition costs and pressure segment income despite revenue growth.
  
• The real estate and travel and transportation domains in the Incubation segment faced lower revenue growth rates, which may impact future earnings if these areas don't improve or new successful businesses aren't developed.
  
• High spending on large-scale advertising campaigns and special dividends could constrain available resources for other strategic investments, potentially impacting the company's long-term capital allocation and revenue generation strategies.

Valuation

• The analysts have a consensus price target of ¥2682.0 for Kakaku.com based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ¥3000.0, and the most bearish reporting a price target of just ¥2400.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ¥99.2 billion, earnings will come to ¥27.8 billion, and it would be trading on a PE ratio of 22.7x, assuming you use a discount rate of 5.9%.
  
• Given the current share price of ¥2307.0, the analyst price target of ¥2682.0 is 14.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.