Digital Arts Inc. (2326) AI Stock Analysis

• Market Cap: ¥77.75B
• Dividend Yield: 1.42%
• Average Volume (3M): 119.34K
• Price to Earnings (P/E): 22.9
• Beta (1Y): 0.86
• Revenue Growth: -6.04%
• EPS Growth: -24.88%
• Country: JP
• Employees: 252
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): N/A
• Shares Outstanding: 14,133,000
• 10 Day Avg. Volume: 113,130
• 30 Day Avg. Volume: 119,343
• PEG Ratio: -1.11
• Price to Book (P/B): 5.35
• Price to Sales (P/S): 9.31
• P/FCF Ratio: 33.27
• 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: 66 Neutral
• Price Target: ¥5,908.00 ▼(-6.52% Downside)
• Action: Downgraded Date: 12/30/25
• Date: Action: Downgraded 12/30/25

The score is anchored by strong financial quality (high margins and a debt-free balance sheet), but is pulled down by weak technical momentum (below key moving averages with negative MACD and low RSI/Stoch) and a moderately premium valuation (P/E 27.24 with a modest 1.42% yield).

Positive Factors

Conservative balance sheet (no debt)

A debt-free, steadily rising equity base materially reduces financial risk and preserves strategic optionality. Over the next 2–6 months this supports resilience to cyclical weakness, funds discretionary investment or buybacks without refinancing, and underpins stable capital allocation.

High and consistent margins

Sustained high gross, operating, and net margins indicate durable unit economics and competitive pricing or cost efficiency. Margins provide a buffer against revenue volatility, enabling continued R&D, customer investment and shareholder returns even if top-line growth softens.

Healthy free cash flow generation

FCF that tracks earnings shows the business converts profit into cash, supporting dividends, reinvestment and balance-sheet strength. Over several months this cash generation strengthens operational flexibility, reduces reliance on external financing and supports strategic execution.

Negative Factors

Revenue decline in 2025

A year-over-year revenue decline signals weakening demand or market share pressure. If this trend persists beyond a quarter it can structurally limit reinvestment, slow scale economics, and force strategic shifts in product/market focus that impair medium-term growth prospects.

Easing returns on equity

Declining ROE suggests the company is generating lower profitability per unit of equity, which may reflect margin compression, slower revenue growth, or less efficient capital deployment. Persisting lower ROE would reduce long-term capital returns and could constrain strategic investments.

Volatile cash conversion

Uneven operating cash coverage and volatile FCF raise concerns about earnings quality and working-capital management. Over months this variability can stress operational planning, reduce predictability of shareholder distributions, and increase reliance on reserves despite low debt.

Digital Arts Inc. Business Overview & Revenue Model

Company Description

Digital Arts Inc. develops and markets internet security software and appliances in Japan, the United States, Europe, and the Asia Pacific. It offers DigitalArts@Cloud that provides web security and email security in the cloud; i-FILTER, a web filtering software for corporations; i-FILTER Browser & Cloud, a web security solution for smart devices that prevents private usage, visualizes web access with logs and reports, and prevents leaks of critical information; i-FILTER for consumers, a parental control software; D-SPA, a proxy appliance product; m-FILTER, an email filtering software for corporations; and FinalCode, a persistent password-less file security and tracking solution. The company also provides consulting services related to information security solutions; and support services, software version updates, and web filtering databases. Digital Arts Inc. was founded in 1995 and is headquartered in Tokyo, Japan.

How the Company Makes Money

Digital Arts Inc. generates revenue primarily through the sale of its software products and subscription-based services. The company’s key revenue streams include licensing fees for their software solutions, recurring subscription fees for cloud-based services, and maintenance and support contracts. Additionally, Digital Arts Inc. partners with various technology firms and enterprise clients to integrate their security solutions into broader IT infrastructures, which often involves long-term contracts and strategic partnerships. These partnerships not only enhance the company's market reach but also provide significant contributions to its overall earnings.

Digital Arts Inc. Financial Statement Overview

Summary

Strong overall fundamentals supported by consistently high margins and an exceptionally conservative, debt-free balance sheet. Offsetting factors include a meaningful slowdown versus 2024, with revenue declining in 2025 and softer profitability/returns, plus some volatility in cash conversion and free cash flow.

Income Statement

Profitability is a clear strength, with consistently high gross and operating margins and strong net margins across the period. However, growth has cooled meaningfully: revenue declined in 2025 (annual), and net margin fell versus 2024, signaling some near-term pressure after a strong prior run-up.

Balance Sheet

The balance sheet is very conservative with no debt reported and a steadily rising equity base, which reduces financial risk and supports resilience. Returns on equity are solid (notably strong in 2024) but eased in 2025, suggesting profitability is not scaling as efficiently as last year.

Cash Flow

Free cash flow generation is generally healthy and closely tracks earnings in 2025, which is a positive quality signal. That said, cash conversion is somewhat uneven year to year (including weaker coverage of earnings by operating cash flow in recent periods) and free cash flow has been volatile, which tempers the score.

Breakdown	TTM	Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Income Statement
Total Revenue	10.02B	9.98B	11.51B	10.44B	9.05B	6.83B
Gross Profit	7.06B	7.03B	6.93B	6.77B	6.38B	4.88B
EBITDA	5.42B	5.48B	5.31B	5.30B	5.02B	3.84B
Net Income	3.15B	3.18B	4.38B	3.06B	2.90B	2.06B
Balance Sheet
Total Assets	22.44B	22.63B	22.52B	21.15B	19.34B	14.86B
Cash, Cash Equivalents and Short-Term Investments	18.43B	17.95B	18.34B	17.02B	15.77B	11.38B
Total Debt	0.00	0.00	0.00	0.00	0.00	0.00
Total Liabilities	5.39B	5.26B	6.52B	6.98B	7.18B	4.80B
Stockholders Equity	17.05B	17.36B	16.00B	14.15B	12.14B	10.05B
Cash Flow
Free Cash Flow	0.00	2.79B	1.84B	2.28B	5.19B	4.39B
Operating Cash Flow	0.00	2.82B	2.83B	3.15B	6.17B	5.22B
Investing Cash Flow	0.00	-1.11B	1.01B	-867.00M	-978.00M	-830.00M
Financing Cash Flow	0.00	-2.10B	-2.54B	-1.05B	-810.00M	-671.00M

Digital Arts Inc. Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 6320.00
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:2326, the sentiment is Neutral. The current price of 6320 is above the 20-day moving average (MA) of 5283.75, above the 50-day MA of 5714.30, and below the 200-day MA of 6974.94, indicating a neutral trend. The MACD of -57.53 indicates Negative momentum. The RSI at 55.89 is Neutral, neither overbought nor oversold. The STOCH value of 79.17 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for JP:2326.

Digital Arts Inc. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
4828	77 Outperform	¥81.04B	18.62	31.13%	1.68%	16.12%	46.57%
3692	73 Outperform	¥68.19B	52.43	―	0.20%	50.53%	227.57%
4323	72 Outperform	¥53.32B	18.53	―	1.50%	13.48%	35.63%
4776	71 Outperform	¥100.52B	14.57	―	1.02%	26.47%	142.77%
2326	66 Neutral	¥77.75B	22.88	―	1.42%	-6.04%	-24.88%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
4375	57 Neutral	¥45.81B	104.32	―	―	29.56%	86.66%

Digital Arts Inc. Corporate Events

Digital Arts Posts Higher Nine-Month Earnings and Raises Annual Dividend Outlook

Digital Arts Inc. reported consolidated net sales of ¥7.83 billion for the nine months ended December 31, 2025, up 7.7% year on year, with operating profit rising 6.3% to ¥3.34 billion and profit attributable to owners of parent increasing 7.0% to ¥2.33 billion. Earnings per share improved to ¥171.93, while the company’s financial position remained solid with an equity-to-asset ratio of 73.0% and net assets of ¥17.46 billion. The company maintained its dividend policy and plans a total annual dividend of ¥95.00 per share for the fiscal year ending March 31, 2026, including a commemorative special dividend already paid in the second quarter, signaling continued shareholder returns. For the full fiscal year, Digital Arts is forecasting an 18.2% increase in net sales to ¥11.8 billion and a 21.9% rise in profit attributable to owners of parent to ¥3.88 billion, underscoring expectations of continued growth and reinforcing its stable positioning in the cybersecurity market.

The most recent analyst rating on (JP:2326) stock is a Hold with a Yen6005.00 price target. To see the full list of analyst forecasts on Digital Arts Inc. stock, see the JP:2326 Stock Forecast page.

Digital Arts Completes ¥395 Million Share Buyback Program

Digital Arts Inc. has completed a share buyback program authorized by its board on October 31, 2025, acquiring a total of 60,000 shares for approximately JPY 395 million through market purchases on the Tokyo Stock Exchange. The final tranche, conducted between January 1 and January 22, 2026, involved the purchase of 19,000 shares for about JPY 112.6 million, marking the conclusion of the repurchase initiative that aimed to optimize capital structure and potentially enhance shareholder value by reducing the number of shares outstanding.

The most recent analyst rating on (JP:2326) stock is a Hold with a Yen6005.00 price target. To see the full list of analyst forecasts on Digital Arts Inc. stock, see the JP:2326 Stock Forecast page.

Digital Arts Advances Share Buyback, Acquires 41,000 Shares Under Ongoing Program

Digital Arts Inc. reported progress on its ongoing share buyback program, confirming the purchase of 22,200 shares of its common stock for a total of ¥147.1 million through market transactions on the Tokyo Stock Exchange between December 1 and December 31, 2025. Under a board-approved authorization from October 31, 2025, the company is allowed to repurchase up to 60,000 shares or ¥500 million by February 6, 2026, and had cumulatively acquired 41,000 shares for ¥282.4 million as of the end of December, indicating a continued commitment to capital efficiency and potential shareholder value enhancement through reduced share float.

The most recent analyst rating on (JP:2326) stock is a Hold with a Yen6804.00 price target. To see the full list of analyst forecasts on Digital Arts Inc. stock, see the JP:2326 Stock Forecast page.

Digital Arts Inc. Announces Share Buyback Progress

Digital Arts Inc. announced the acquisition of 18,800 of its own shares for JPY 135,328,000 between November 6 and November 30, 2025, as part of a broader plan approved by the Board of Directors to buy back up to 60,000 shares by February 2026. This move is part of the company’s strategy to enhance shareholder value and optimize its capital structure, potentially impacting its market positioning and investor relations.