Earnings Beat: Kaori Heat Treatment Co., Ltd. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Shareholders of Kaori Heat Treatment Co., Ltd. (TWSE:8996) will be pleased this week, given that the stock price is up 11% to NT$350 following its latest quarterly results. It looks like a credible result overall - although revenues of NT$1.0b were in line with what the analysts predicted, Kaori Heat Treatment surprised by delivering a statutory profit of NT$1.77 per share, a notable 12% above expectations. 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.

Check out our latest analysis for Kaori Heat Treatment

Following the latest results, Kaori Heat Treatment's four analysts are now forecasting revenues of NT$4.40b in 2024. This would be a decent 14% improvement in revenue compared to the last 12 months. Per-share earnings are expected to bounce 30% to NT$7.76. Before this earnings report, the analysts had been forecasting revenues of NT$4.68b and earnings per share (EPS) of NT$7.78 in 2024. So it looks like the analysts have become a bit less optimistic after the latest results announcement, with revenues expected to fall even as the company is supposed to maintain EPS.

The average price target was reduced 15% to NT$472, with the lower revenue forecasts indicating negative sentiment towards Kaori Heat Treatment, even though earnings forecasts were unchanged. 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 Kaori Heat Treatment at NT$533 per share, while the most bearish prices it at NT$415. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Kaori Heat Treatment is an easy business to forecast or the the analysts are all using similar assumptions.

Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Kaori Heat Treatment's growth to accelerate, with the forecast 31% annualised growth to the end of 2024 ranking favourably alongside historical growth of 18% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 15% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Kaori Heat Treatment is expected to grow much faster than its industry.

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. They also downgraded Kaori Heat Treatment's revenue estimates, but industry data suggests that it is expected to grow faster than the wider industry. Even so, earnings are more important to the intrinsic value of the business. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Kaori Heat Treatment's future valuation.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Kaori Heat Treatment going out to 2026, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Kaori Heat Treatment , and understanding this should be part of your investment process.

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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.