Earnings Release: Here's Why Analysts Cut Their SMS Co., Ltd. (TSE:2175) Price Target To JP¥1,777

Shareholders of SMS Co., Ltd. (TSE:2175) will be pleased this week, given that the stock price is up 15% to JP¥1,327 following its latest annual results. SMS reported in line with analyst predictions, delivering revenues of JP¥61b and statutory earnings per share of JP¥70.96, suggesting the business is executing well and in line with its plan. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

We've discovered 2 warning signs about SMS. View them for free.

After the latest results, the seven analysts covering SMS are now predicting revenues of JP¥67.9b in 2026. If met, this would reflect a notable 11% improvement in revenue compared to the last 12 months. Per-share earnings are expected to swell 20% to JP¥85.28. Before this earnings report, the analysts had been forecasting revenues of JP¥67.7b and earnings per share (EPS) of JP¥81.26 in 2026. So the consensus seems to have become somewhat more optimistic on SMS' earnings potential following these results.

See our latest analysis for SMS

The consensus price target fell 14% to JP¥1,777, suggesting the increase in earnings forecasts was not enough to offset other the analysts concerns. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on SMS, with the most bullish analyst valuing it at JP¥3,500 and the most bearish at JP¥1,250 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

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 can infer from the latest estimates that forecasts expect a continuation of SMS'historical trends, as the 11% annualised revenue growth to the end of 2026 is roughly in line with the 12% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 7.2% per year. So it's pretty clear that SMS is forecast to grow substantially faster than its industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around SMS' earnings potential next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of SMS' future valuation.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for SMS going out to 2028, and you can see them free on our platform here.

Before you take the next step you should know about the 2 warning signs for SMS (1 doesn't sit too well with us!) that we have uncovered.

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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.