Insource Co., Ltd. (TSE:6200) Just Reported Earnings, And Analysts Cut Their Target Price

Shareholders of Insource Co., Ltd. (TSE:6200) will be pleased this week, given that the stock price is up 16% to JP¥724 following its latest third-quarter results. Results were roughly in line with estimates, with revenues of JP¥4.0b and statutory earnings per share of JP¥49.20. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

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Taking into account the latest results, the consensus forecast from Insource's four analysts is for revenues of JP¥17.7b in 2027. This reflects a notable 15% improvement in revenue compared to the last 12 months. Per-share earnings are expected to grow 16% to JP¥59.31. In the lead-up to this report, the analysts had been modelling revenues of JP¥17.9b and earnings per share (EPS) of JP¥59.91 in 2027. 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.

See our latest analysis for Insource

The consensus price target fell 47% to JP¥850, suggesting that the analysts might have been a bit enthusiastic in their previous valuation - or they were expecting the company to provide stronger guidance in the quarterly results. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Insource at JP¥1,100 per share, while the most bearish prices it at JP¥600. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Insource shareholders.

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 pretty clear that there is an expectation that Insource's revenue growth will slow down substantially, with revenues to the end of 2027 expected to display 12% growth on an annualised basis. This is compared to a historical growth rate of 15% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 7.7% per year. Even after the forecast slowdown in growth, it seems obvious that Insource is also expected to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Insource's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Insource. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Insource analysts - going out to 2028, and you can see them free on our platform here.

You can also see our analysis of Insource's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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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.