Capcom (TSE:9697) Profit Margins Reach 31.2%, Reinforcing Consensus on Earnings Quality

Capcom (TSE:9697) delivered an impressive year, with earnings growing 81.9% over the last twelve months and driving profit margins to 31.2%, up from 24.9% a year ago. Over the past five years, the company has achieved a solid 15.3% annual earnings growth rate. Forward guidance projects revenue growth of 6.5% per year and annual earnings expansion of 7.7%. These results highlight Capcom’s robust quality of earnings, improving profitability, and steady growth outlook. Together, these factors position the company ahead of the broader Japanese market.

See our full analysis for Capcom.

The next step is to see how these headline results compare with the market’s wider story. We are comparing the numbers with the major narratives to see what holds up and what is put to the test.

See what the community is saying about Capcom

Profit Margins Outpace Sector Peers

• Capcom’s profit margins climbed to 31.2%, above last year's 24.9% and currently outpacing sector averages. This margin shows a material gap not only with its previous performance but also relative to broader industry standards.
• Analysts’ consensus narrative highlights that Capcom’s expanding global reach and digital content strategy underpins these impressive margins,
  • Growth in digital catalog sales and stronger international presence are expected to keep margin expansion on track, reinforcing the view that profit quality remains robust.
  • However, critics from the same consensus warn that rising talent and development costs, particularly associated with ambitious development strategies, could start pinching margins in the coming years and stress the need for ongoing cost control initiatives.

Consensus narrative sees Capcom’s margin gains as especially notable compared to its peers. See how this fits into the broader industry debate. 📊 Read the full Capcom Consensus Narrative.

Growth Forecasts Beat the Local Market

• With revenue forecast to grow at 6.5% per year, Capcom is set to outpace the Japanese market’s average of 4.5%. This outperformance solidifies its place among leading domestic gaming companies.
• According to the consensus narrative, Capcom's global expansion, particularly into emerging markets and digital platforms, is at the center of this growth story,
  • broadening the company's international footprint while supporting revenue sustainability.
  • The recurring income from diversified content strategies, such as sequels, remakes, and transmedia, serves to stabilize topline growth and reinforces bullish expectations on forward momentum.

Valuation Reflects Growth Premium

• Capcom’s 27.6x Price-to-Earnings Ratio positions it as less expensive than direct sector peers (35x average), but pricier than the Japanese entertainment industry as a whole (21.9x). The company trades at ¥4,000 per share, a 14.2% discount to the analyst price target of ¥4,660, but more than double the DCF fair value of ¥1,869.07.
• Per the consensus narrative, bullish investors believe Capcom’s improving margins and international strategy justify the premium,
  • with upward-trending profit margins making above-market multiples less risky in their view.
  • Yet, consensus also notes analyst disagreement: some are cautious, citing heavy reliance on key franchises and a higher cost base as reasons why the stock’s elevated multiple could become harder to defend if growth slows or a major release underperforms.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Capcom on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Got your own angle on the numbers? Take a few minutes to build out your perspective and share your narrative. Do it your way

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Capcom.

See What Else Is Out There

While Capcom’s premium valuation and reliance on a few major franchises have some analysts cautious about downside risk if growth momentum slows, there are alternatives.

If you are looking for companies trading at more attractive prices with strong fundamentals, our these 856 undervalued stocks based on cash flows can help you discover better value opportunities right now.

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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