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

Investors in Toei Animation Co.,Ltd. (TYO:4816) had a good week, as its shares rose 3.3% to close at JP¥10,200 following the release of its quarterly results. It looks to have been a decent result overall - while revenue fell marginally short of analyst estimates at JP¥13b, statutory earnings beat expectations by a notable 26%, coming in at JP¥73.91 per share. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Toei AnimationLtd

Taking into account the latest results, the consensus forecast from Toei AnimationLtd's six analysts is for revenues of JP¥54.5b in 2022, which would reflect a modest 6.8% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to dip 4.3% to JP¥261 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of JP¥55.0b and earnings per share (EPS) of JP¥258 in 2022. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

The consensus price target rose 15% to JP¥5,800despite there being no meaningful change to earnings estimates. It could be that the analystsare reflecting the predictability of Toei AnimationLtd's earnings by assigning a price premium. 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 Toei AnimationLtd, with the most bullish analyst valuing it at JP¥10,000 and the most bearish at JP¥800 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. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Toei AnimationLtd's revenue growth will slow down substantially, with revenues next year expected to grow 6.8%, compared to a historical growth rate of 10% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 2.0% next year. So it's pretty clear that, while Toei AnimationLtd's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are 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 in mind, we wouldn't be too quick to come to a conclusion on Toei AnimationLtd. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Toei AnimationLtd going out to 2025, 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 Toei AnimationLtd you should be aware of.

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This article by Simply Wall St is general in nature. 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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