Earnings Miss: Disco Corporation Missed EPS By 14% And Analysts Are Revising Their Forecasts

It's been a sad week for Disco Corporation (TSE:6146), who've watched their investment drop 16% to JP¥52,700 in the week since the company reported its first-quarter result. It was not a great result overall. While revenues of JP¥83b were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 14% to hit JP¥219 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Disco

After the latest results, the 16 analysts covering Disco are now predicting revenues of JP¥408.9b in 2025. If met, this would reflect a huge 22% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to soar 45% to JP¥1,270. Yet prior to the latest earnings, the analysts had been anticipated revenues of JP¥401.2b and earnings per share (EPS) of JP¥1,212 in 2025. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

There's been no major changes to the consensus price target of JP¥63,138, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Disco at JP¥78,000 per share, while the most bearish prices it at JP¥37,000. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

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. It's clear from the latest estimates that Disco's rate of growth is expected to accelerate meaningfully, with the forecast 30% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 19% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 12% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Disco to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Disco's earnings potential next year. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is 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.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Disco going out to 2027, and you can see them free on our platform here.

Even so, be aware that Disco is showing 1 warning sign in our investment analysis , you should know about...

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com