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On Tuesday, Goldman Sachs analyst Chikai Tanaka upgraded shares of TIS Inc (3626:JP) (OTC: TISNF) from Neutral to Buy, also raising the price target to JPY4,410 from JPY3,820. The upgrade follows TIS Inc’s third-quarter earnings report for the fiscal year ending March 2025, which saw the company’s operating profits exceed both its own cautious guidance and consensus estimates.
Tanaka highlighted that despite TIS maintaining its full-year operating profit guidance, there is potential for an upside. This optimism is based on the expectation that the negative impact of a large unprofitable project recorded in the fourth quarter of the previous fiscal year will not recur in the current fiscal year.
The analyst pointed out that TIS Inc’s price-to-earnings (P/E) ratio has significantly declined below the sector average over the past 18 months. This decline was primarily due to concerns about the company’s large financial projects coming to an end. However, with the completion of these projects, Tanaka believes that the stock’s discount will narrow as the company’s earnings begin to recover.
Furthermore, TIS Inc has been actively working to strengthen its margins at the order stage and to improve the management of its project progress. According to Tanaka, these efforts are expected to lead to a gradual decline in the value of unprofitable projects and an improvement in gross profit margins starting from the fiscal year ending March 2025.
Tanaka’s analysis suggests that as the company moves past the peak impact of its large financial projects, higher capacity utilization will contribute to TIS Inc’s improved earnings. The upgraded rating and price target reflect Goldman Sachs’ confidence in TIS Inc’s financial recovery and future performance.
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