Entrust (TSE:7191) Margin Gains Reinforce Quality Earnings Narrative in Latest Results

Entrust (TSE:7191) posted revenue growth of 11.3% per year, beating the broader Japanese market’s 4.5% pace. EPS is also set to grow at 7.78% annually, just shy of the market average. Over the last five years, earnings have grown by 18.2% per year, and last year's net profit margin rose to 13.9% from 13.3%. With steady improvement in margins and a valuation sitting just below estimated fair value, the story is one of solid financial progress, offset only by a slightly elevated Price-To-Earnings Ratio compared to peers.

See our full analysis for Entrust.

The next step is to put these headline results in context. Let’s see how they stack up against the narrative followed by the broader market and Simply Wall St community.

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Profit Margins Push Higher

• Net profit margin improved to 13.9%, up from 13.3% last year. This reflects management's ability to turn a larger portion of revenue into profit even as earnings growth moderates from its 22.3% surge the prior year.
• Heavily supporting the bullish case, margin expansion stands out by reinforcing the stock’s reputation for quality earnings, despite some slowdown compared to its stellar 18.2% five-year earnings growth average.
  • Strong margin gains strengthen optimism that Entrust can defend profitability even if headline growth rates normalize closer to the sector’s forecasted 7.9% pace.
  • Bulls would highlight that consistent margin improvement offsets concerns about earnings growth moderating below the 20% “high growth” threshold typically watched by analysts.

Growth Rate Slides Below Leaders

• Forecast earnings growth of 7.78% per year now lags just behind the broader market’s 7.9% trajectory and is seen as less significant compared to the prior five-year average of 18.2% per year.
• Caution emerges when comparing this easing growth pace to the past, as prevailing market analysis notes that investors might demand clearer future catalysts, even though the company’s recent annual earnings growth sharply outpaced both its history and sector trends.
  • While past momentum is impressive, analysts expect expansion to moderate, limiting the upside unless Entrust can deliver new products or initiatives that surprise to the upside.
  • In a sector driven by innovation, critics argue that without standout growth, short-term optimism may fade as competing companies chase higher targets.

Valuation Remains a Mixed Signal

• The current share price of ¥1073 trades slightly below the DCF fair value of ¥1098.95, but the price-to-earnings ratio sits at 15.2x, which is well above the peer average of 10.2x and the industry’s 12.2x. This introduces questions about the company’s relative value.
• Prevailing market perspective emphasizes that while the discount to DCF fair value may attract fundamental investors, the premium P/E compared to industry norms means buyers must weigh quality and growth against a somewhat elevated entry point.
  • Solid fundamentals and improved profitability help justify paying up, yet the value case relies on margins holding and growth delivering above-average consistency.
  • Sentiment may shift if competitors narrow the quality gap without similarly high valuations, adding a competitive dynamic to the investment calculus.

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on Entrust's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

Entrust’s growth outlook is moderating, with earnings momentum and expansion now trailing the sector’s leaders, which raises doubts about future upside.

If you want more consistent growth and fewer question marks, check out stable growth stocks screener (2119 results) to spot companies delivering steady results through market cycles.

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.

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