THK Co., Ltd. Just Missed EPS By 22%: Here's What Analysts Think Will Happen Next

Last week, you might have seen that THK Co., Ltd. (TSE:6481) released its yearly result to the market. The early response was not positive, with shares down 5.4% to JP¥3,584 in the past week. It looks like a pretty bad result, all things considered. Although revenues of JP¥353b were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 22% to hit JP¥85.17 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Check out our latest analysis for THK

Taking into account the latest results, the most recent consensus for THK from twelve analysts is for revenues of JP¥365.5b in 2025. If met, it would imply a modest 3.6% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to surge 104% to JP¥176. Before this earnings report, the analysts had been forecasting revenues of JP¥377.1b and earnings per share (EPS) of JP¥177 in 2025. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.

The consensus has reconfirmed its price target of JP¥3,987, showing that the analysts don't expect weaker revenue expectations next year to have a material impact on THK's market value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic THK analyst has a price target of JP¥5,000 per share, while the most pessimistic values it at JP¥2,100. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that THK's revenue growth is expected to slow, with the forecast 3.6% annualised growth rate until the end of 2025 being well below the historical 9.8% p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.7% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than THK.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Still, earnings per share are more important to value creation for shareholders. 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.

With that in mind, we wouldn't be too quick to come to a conclusion on THK. Long-term earnings power is much more important than next year's profits. We have forecasts for THK going out to 2027, and you can see them free on our platform here.

You still need to take note of risks, for example - THK has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

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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.