Results: SMS Co., Ltd. Exceeded Expectations And The Consensus Has Updated Its Estimates

It's been a sad week for SMS Co., Ltd. (TSE:2175), who've watched their investment drop 16% to JP¥1,340 in the week since the company reported its interim result. It looks to have been a decent result overall - while revenue fell marginally short of analyst estimates at JP¥33b, statutory earnings beat expectations by a notable 139%, coming in at JP¥13.12 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on SMS after the latest results.

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Taking into account the latest results, the consensus forecast from SMS' six analysts is for revenues of JP¥67.5b in 2026. This reflects a credible 7.8% improvement in revenue compared to the last 12 months. Statutory earnings per share are expected to reduce 5.5% to JP¥84.90 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of JP¥66.9b and earnings per share (EPS) of JP¥87.51 in 2026. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.

Check out our latest analysis for SMS

It might be a surprise to learn that the consensus price target was broadly unchanged at JP¥1,676, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. 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. Currently, the most bullish analyst values SMS at JP¥2,220 per share, while the most bearish prices it at JP¥1,500. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that SMS' rate of growth is expected to accelerate meaningfully, with the forecast 16% annualised revenue growth to the end of 2026 noticeably faster than its historical growth of 13% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.8% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect SMS to grow faster than the wider industry.

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. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. 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 said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for SMS going out to 2028, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 2 warning signs for SMS 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.