Tokai Rika Co., Ltd. Just Missed EPS By 15%: Here's What Analysts Think Will Happen Next

Shareholders might have noticed that Tokai Rika Co., Ltd. (TSE:6995) filed its full-year result this time last week. The early response was not positive, with shares down 6.9% to JP¥2,140 in the past week. Revenues were in line with forecasts, at JP¥624b, although statutory earnings per share came in 15% below what the analysts expected, at JP¥277 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Tokai Rika

Taking into account the latest results, Tokai Rika's five analysts currently expect revenues in 2025 to be JP¥623.7b, approximately in line with the last 12 months. Per-share earnings are expected to grow 16% to JP¥317. Before this earnings report, the analysts had been forecasting revenues of JP¥642.1b and earnings per share (EPS) of JP¥327 in 2025. The analysts are less bullish than they were before these results, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.

The average price target climbed 23% to JP¥2,667despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes. 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. There are some variant perceptions on Tokai Rika, with the most bullish analyst valuing it at JP¥3,000 and the most bearish at JP¥2,400 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that Tokai Rika's revenue growth is expected to slow, with the forecast 0.02% annualised growth rate until the end of 2025 being well below the historical 4.7% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 3.9% annually. Factoring in the forecast slowdown in growth, it seems obvious that Tokai Rika is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Tokai Rika. Long-term earnings power is much more important than next year's profits. We have forecasts for Tokai Rika going out to 2026, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Tokai Rika that you should be aware of.

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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.