Musashi Co., Ltd. Just Missed Earnings And Its Revenue Numbers Were Weaker Than Expected

Last week, you might have seen that Musashi Co., Ltd. (TYO:7521) released its quarterly result to the market. The early response was not positive, with shares down 2.5% to JP¥1,897 in the past week. Revenues were JP¥7.6b, 10% below analyst expectations, although losses didn't appear to worsen significantly, with a per-share statutory loss of JP¥116 being in line with what the analyst forecast. Following the result, the analyst has 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. So we collected the latest post-earnings statutory consensus estimate to see what could be in store for next year.

See our latest analysis for Musashi

Taking into account the latest results, the most recent consensus for Musashi from solitary analyst is for revenues of JP¥36.5b in 2022 which, if met, would be a meaningful 18% increase on its sales over the past 12 months. Earnings are expected to improve, with Musashi forecast to report a statutory profit of JP¥111 per share. Yet prior to the latest earnings, the analyst had been anticipated revenues of JP¥39.0b and earnings per share (EPS) of JP¥156 in 2022. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a large cut to earnings per share estimates.

The consensus price target fell 9.1% to JP¥2,000, with the weaker earnings outlook clearly leading valuation estimates.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One thing stands out from these estimates, which is that Musashi is forecast to grow faster in the future than it has in the past, with revenues expected to grow 18%. If achieved, this would be a much better result than the 0.5% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in the industry are forecast to see their revenue grow 6.4% per year. Not only are Musashi's revenues expected to improve, it seems that the analyst is also expecting it to grow faster than the wider industry.

The Bottom Line

The biggest concern is that the analyst reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Musashi. Regrettably, they also downgraded their revenue estimates, but the latest forecasts still imply the business will grow faster than the wider industry. Furthermore, the analyst also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that in mind, we wouldn't be too quick to come to a conclusion on Musashi. Long-term earnings power is much more important than next year's profits. We have analyst estimates for Musashi going out as far as 2023, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 1 warning sign for Musashi you should be aware of.

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