With Year-end Earnings season nearing, we are about to see all the new Guidance and FY1 forecasts. As we have previously shown, Analysts do not really worry about FY2 until it becomes FY1. So we went out and calculated an EPS number based on the 10-year historical median PE. This gives a kind of baseline to compare with the new FY1 estimates. For example, Sankyo’s (6417) current FY2 EPS forecast ¥145, however the 10Y median PE based EPS is ¥309. As you can see in the chart below, the median PE based EPS is significantly higher than any EPS forecast since 2012. If Sankyo’s PE is to move back in line with historical numbers, either EPS has to go up a lot or Price has to give more.
In the attached files, we have the historical charts with the TOPIX500 universe and then also a screen comparing the PE EPS with current FY2 forecasts with both positive and negative results. For example, TDK’s median PE based EPS is just ¥355 compared to the current FY2 EPS is at ¥1,331. TDK’s current FY2 PE is at 4.5x while its historical median PE is 17x. Maybe the new FY1 estimates will be lower than the current FY2, but there still looks to be good room for expansion.
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