Earnings Update: Here's Why Analysts Just Lifted Their Genky DrugStores Co., Ltd. (TSE:9267) Price Target To JP¥7,600

Genky DrugStores Co., Ltd. (TSE:9267) shareholders are probably feeling a little disappointed, since its shares fell 3.7% to JP¥5,790 in the week after its latest third-quarter results. Results were roughly in line with estimates, with revenues of JP¥45b and statutory earnings per share of JP¥314. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Genky DrugStores after the latest results.

Check out our latest analysis for Genky DrugStores

Following the latest results, Genky DrugStores' three analysts are now forecasting revenues of JP¥199.4b in 2025. This would be a meaningful 9.9% improvement in revenue compared to the last 12 months. Per-share earnings are expected to ascend 11% to JP¥433. Before this earnings report, the analysts had been forecasting revenues of JP¥199.4b and earnings per share (EPS) of JP¥391 in 2025. Although the revenue estimates have not really changed, we can see there's been a nice increase in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.

The consensus price target rose 22% to JP¥7,600, suggesting that higher earnings estimates flow through to the stock's valuation as well. 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 Genky DrugStores, with the most bullish analyst valuing it at JP¥7,900 and the most bearish at JP¥7,300 per share. This is a very narrow spread of estimates, implying either that Genky DrugStores is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

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. We would highlight that Genky DrugStores' revenue growth is expected to slow, with the forecast 7.9% annualised growth rate until the end of 2025 being well below the historical 11% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 4.3% per year. So it's pretty clear that, while Genky DrugStores' revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Genky DrugStores' 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. 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 said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Genky DrugStores analysts - going out to 2026, 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 Genky DrugStores 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.