The analysts might have been a bit too bullish on Kaken Pharmaceutical Co., Ltd. (TSE:4521), given that the company fell short of expectations when it released its half-yearly results last week. It was a pretty negative result overall, with revenues of JP¥19b missing analyst predictions by 9.7%. Worse, the business reported a statutory loss of JP¥11.57 per share, much larger than the analysts had forecast prior to the result. 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. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Kaken Pharmaceutical after the latest results.
Following last week's earnings report, Kaken Pharmaceutical's four analysts are forecasting 2027 revenues to be JP¥87.5b, approximately in line with the last 12 months. Statutory earnings per share are forecast to plummet 23% to JP¥185 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of JP¥86.9b and earnings per share (EPS) of JP¥166 in 2027. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the decent improvement in earnings per share expectations following these results.
Check out our latest analysis for Kaken Pharmaceutical
There's been no major changes to the consensus price target of JP¥4,575, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Kaken Pharmaceutical at JP¥5,600 per share, while the most bearish prices it at JP¥4,000. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Kaken Pharmaceutical's revenue growth will slow down substantially, with revenues to the end of 2027 expected to display 2.4% growth on an annualised basis. This is compared to a historical growth rate of 3.6% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 3.5% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Kaken Pharmaceutical.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Kaken Pharmaceutical's earnings potential next year. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at JP¥4,575, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Kaken Pharmaceutical going out to 2029, 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 2 warning signs with Kaken Pharmaceutical (at least 1 which is significant) , and understanding these should be part of your investment process.
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