FRONTEO, Inc. (2158) AI Stock Analysis

• Market Cap: ¥32.91B
• Dividend Yield: N/A
• Average Volume (3M): 2.22M
• Price to Earnings (P/E): 119.2
• Beta (1Y): 1.83
• Revenue Growth: -10.49%
• EPS Growth: N/A
• Country: JP
• Employees: 225
• Sector: Technology
• Sector Strength: 88
• Industry: Information Technology Services
• EPS (TTM): 2.42
• Shares Outstanding: 39,412,360
• 10 Day Avg. Volume: 1,134,060
• 30 Day Avg. Volume: 2,218,706
• PEG Ratio: -0.34
• Price to Book (P/B): 7.05
• Price to Sales (P/S): 3.73
• P/FCF Ratio: 34.04
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 55 Neutral
• Price Target: ¥848.00 ▼(-2.86% Downside)

The overall stock score of 55 reflects a combination of mixed financial performance, neutral technical indicators, and high valuation concerns. The company's financials show potential for recovery but are currently unstable, while technical analysis suggests a lack of strong momentum. The high P/E ratio indicates overvaluation, which is a significant risk factor.

Positive Factors

Diversified revenue streams

FRONTEO's mix of services, software/subscriptions and AI analytics creates multiple revenue pillars. This reduces dependence on any single market cycle, supports cross-selling between services and products, and provides pathways to build recurring revenue over the medium term.

Consistent gross margin

A consistently positive gross margin indicates structural cost control and pricing power in core offerings. That underlying profitability at the gross level gives the company room to scale SG&A and R&D while improving operating leverage as revenues stabilize, supporting sustainable earnings recovery.

Improving leverage and ROE

An improving debt-to-equity profile and return on equity turning positive signal strengthening capitalization and better capital efficiency. This enhances financial flexibility to invest in product development and pursue strategic contracts without materially increasing solvency risk.

Negative Factors

Inconsistent free cash flow

Volatile and recently declining free cash flow undermines the firm's ability to self-fund growth, repay debt, or return capital to shareholders. Over months this can constrain investment in product development or sales capacity and force reliance on external financing under adverse terms.

Volatile profitability and revenue

Large swings from profit to loss and a recent revenue decline point to unstable demand or execution issues. Persistent volatility in top-line and net margins makes forecasting cash generation difficult and risks impairing long-term customer and partner confidence needed for enterprise contracts.

Relatively low equity ratio

A lower equity ratio reduces the balance sheet's shock absorption, increasing vulnerability to downturns or large contract churn. Structurally, this can raise borrowing costs and limit strategic flexibility, making the company more sensitive to adverse industry or macro developments over the medium term.

FRONTEO, Inc. Business Overview & Revenue Model

Company Description

FRONTEO, Inc. provides Asian-language eDiscovery solutions and services primarily in Japan, the United States, Korea, and internationally. The company operates through LegalTech AI Business and AI Solution Business segments. It has eDiscovery and forensic information documented in Japanese, Korean, Chinese, and English. The company assists clients involved in cross-border litigation, administrative proceedings, and internal investigations, including those related to antitrust investigations, intellectual property litigation, the Foreign Corrupt Practices Act, and product liability investigations. It also provides Lit i View, an online eDiscovery software, which handles Asian-language characters, encoding schemes, and native file systems; and Intelligence Cloud solution to address the substantial complexity and cost associated with international investigations and litigations. In addition, the company offers electronic data forensic investigation solutions and services that enable the preservation, analysis, processing, and production of electronically stored information in connection with fraud and corporate information leakage; and Lit i View XAMINER, a digital forensic software, and other related hardware and software products; and forensic tools. Further, it helps to create document management procedures; conduct corporate risk audits; and comply with legal requirements to provide information to stakeholders. Additionally, the company provides AI solutions in the fields of business intelligence, healthcare, and digital communications. It serves enterprises, government agencies, law firms, corporate legal departments, and other professional advisors under the FRONTEO, KIBIT, Lit i View, and Landscaping brands. The company was formerly known as UBIC, Inc. and changed its name to FRONTEO, Inc. in July 2016. FRONTEO, Inc. was founded in 2003 and is headquartered in Tokyo, Japan.

How the Company Makes Money

FRONTEO generates revenue through multiple streams centered around its software and service offerings. The company primarily earns money by selling licenses for its proprietary software solutions, which are utilized in eDiscovery, data management, and analytics. Additionally, FRONTEO provides consulting services that help organizations integrate and leverage their technology effectively, which further contributes to its revenue. Strategic partnerships with law firms, healthcare providers, and enterprises enhance its market reach and can lead to recurring revenue through long-term contracts. The company may also explore revenue through subscription models for ongoing access to its software and support services.

FRONTEO, Inc. Financial Statement Overview

Summary

FRONTEO, Inc. exhibits a mixed financial performance. While there are signs of operational recovery and improved leverage, the company faces challenges with erratic revenue and profit margins, coupled with inconsistent cash flow. Stabilizing cash flows and enhancing profitability will be crucial for future growth and financial stability.

Income Statement

The company's income statement shows a volatile performance over recent years. The gross profit margin has been consistently positive, indicating good cost management relative to revenue. However, there is a significant fluctuation in net profit margin, with recent losses in 2023 and 2024 following profitable years. Revenue growth has also been erratic, with a decline in 2025. Despite this, recent improvements in EBIT and EBITDA margins suggest a recovery in operational efficiency.

Balance Sheet

The balance sheet reflects a moderate financial position. The debt-to-equity ratio has improved, indicating better leverage management. Return on equity is turning positive again, showing potential for increasing shareholder value. However, a relatively low equity ratio could indicate risk if financial conditions worsen. Overall, there is a positive trajectory in strengthening the balance sheet.

Cash Flow

Cash flow analysis reveals inconsistent free cash flow growth, with a notable decline in recent periods. The operating cash flow to net income ratio is positive, suggesting that the company is generating cash from its operations. However, the free cash flow to net income ratio shows variability, indicating challenges in converting profits into free cash. The company needs to stabilize its cash flow generation to ensure long-term financial health.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	6.07B	6.10B	7.38B	7.22B	10.93B	10.37B
Gross Profit	3.37B	3.45B	3.48B	3.26B	5.57B	4.78B
EBITDA	717.38M	614.80M	-1.93B	-728.90M	2.69B	1.40B
Net Income	262.29M	555.09M	-2.84B	-1.70B	1.31B	359.10M
Balance Sheet
Total Assets	7.85B	6.47B	7.52B	9.15B	11.83B	11.94B
Cash, Cash Equivalents and Short-Term Investments	2.17B	2.60B	3.04B	1.48B	3.46B	3.00B
Total Debt	3.10B	1.99B	2.93B	3.09B	3.75B	5.63B
Total Liabilities	4.51B	3.24B	4.68B	4.10B	5.38B	7.30B
Stockholders Equity	3.34B	3.23B	2.84B	5.05B	6.44B	4.64B
Cash Flow
Free Cash Flow	0.00	668.34M	1.23B	-1.54B	1.72B	1.45B
Operating Cash Flow	0.00	751.47M	1.71B	-914.62M	2.38B	2.03B
Investing Cash Flow	0.00	-254.03M	-181.86M	-625.06M	-618.21M	-347.73M
Financing Cash Flow	0.00	-911.48M	-32.15M	-606.32M	-1.46B	-53.02M

FRONTEO, Inc. Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 873.00
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:2158, the sentiment is Negative. The current price of 873 is above the 20-day moving average (MA) of 869.00, above the 50-day MA of 871.66, and above the 200-day MA of 801.59, indicating a neutral trend. The MACD of -12.87 indicates Positive momentum. The RSI at 41.23 is Neutral, neither overbought nor oversold. The STOCH value of 24.46 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for JP:2158.

FRONTEO, Inc. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
2359	80 Outperform	¥32.16B	11.35	―	2.93%	2.11%	5.55%
4396	76 Outperform	¥26.87B	17.89	―	1.70%	22.25%	31.88%
3788	76 Outperform	¥25.01B	24.84	―	1.50%	7.83%	49.73%
3393	74 Outperform	¥27.11B	14.03	―	4.36%	12.32%	10.42%
2349	72 Outperform	¥26.65B	11.31	―	1.21%	7.21%	0.30%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
2158	55 Neutral	¥32.91B	119.24	―	―	-10.49%	―