Watts Co., Ltd. (2735) AI Stock Analysis

• Market Cap: ¥8.19B
• Dividend Yield: 3.67%
• Average Volume (3M): 47.25K
• Price to Earnings (P/E): 9.6
• Beta (1Y): 0.05
• Revenue Growth: 0.52%
• EPS Growth: -3.78%
• Country: JP
• Employees: 436
• Sector: Consumer Defensive
• Sector Strength: 42
• Industry: Grocery Stores
• EPS (TTM): 14.72
• Shares Outstanding: 13,458,800
• 10 Day Avg. Volume: 68,620
• 30 Day Avg. Volume: 47,246
• PEG Ratio: -2.74
• Price to Book (P/B): 0.67
• Price to Sales (P/S): 0.14
• P/FCF Ratio: -3.18
• 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): 68
• Revenue Forecast (FY): ¥62.50B

• Rating: 63 Neutral
• Price Target: ¥681.00 ▲(6.57% Upside)
• Action: Downgraded Date: 12/19/25
• Date: Action: Downgraded 12/19/25

Watts Co., Ltd. scores moderately due to its stable financial performance and attractive valuation. However, technical indicators suggest potential short-term weakness, and the company faces challenges with declining profitability and cash flow issues. The stock's undervaluation and dividend yield are significant positives, but operational improvements are needed for a stronger outlook.

Positive Factors

Stable Gross Margins

Consistent gross margins indicate effective cost management, supporting long-term profitability and competitive pricing strategies.

Conservative Balance Sheet

A low debt-to-equity ratio suggests financial stability and flexibility, allowing the company to withstand economic fluctuations and invest in growth.

Robust Distribution Network

A strong distribution network enhances market reach and customer access, driving sustained revenue growth and market position.

Negative Factors

Declining Profitability

Falling net margins indicate challenges in maintaining profitability, which could impact long-term earnings potential and shareholder value.

Negative Cash Flows

Negative cash flows highlight liquidity issues, potentially limiting the company's ability to fund operations and invest in growth initiatives.

Revenue Growth Challenges

Negative revenue growth raises concerns about market competitiveness and demand, affecting future earnings and strategic positioning.

Watts Co., Ltd. Business Overview & Revenue Model

Company Description

Watts Co., Ltd., together with its subsidiaries, engages in the wholesale and retail business of daily necessities and household items in Japan and internationally. It is also involved in the retail business of groceries; and wholesale and retail business of life and other miscellaneous goods. In addition, the company operates its stores under the 100-Yen shop brand. Further, it operates a grocery store under the Buona vita brand; time-themed general store under the Tokino: ne brand; and uniform shop under the KOMONOYA and KOMONOKAEN brands. Watts Co., Ltd. was incorporated in 1995 and is headquartered in Osaka, Japan.

How the Company Makes Money

Watts Co., Ltd. generates revenue through multiple streams, primarily from the sale of its core products which include plumbing fixtures, valves, and water quality solutions. The company benefits from a robust distribution network that allows it to reach a wide customer base, including wholesalers, contractors, and retailers. Additionally, Watts Co., Ltd. engages in strategic partnerships with construction firms and engineering companies to supply tailored solutions for large-scale projects, contributing significantly to its earnings. The company's focus on innovation and sustainability also positions it to capitalize on emerging markets and trends in water management, further enhancing its revenue potential.

Watts Co., Ltd. Financial Statement Overview

Summary

Watts Co., Ltd. demonstrates stable gross margins and a conservative balance sheet, but faces challenges with declining profitability and negative cash flows. The company needs to address revenue growth and cash flow management to improve its financial health and support future growth.

Income Statement

Watts Co., Ltd. shows a stable gross profit margin of around 38% over the years, indicating consistent cost management. However, the net profit margin has decreased slightly to 1.4% in the latest year, reflecting challenges in maintaining profitability. Revenue growth has been negative recently, which is concerning for future earnings potential. The EBIT and EBITDA margins have also shown a declining trend, suggesting pressure on operational efficiency.

Balance Sheet

The company's debt-to-equity ratio has increased slightly but remains relatively low at 0.26, indicating a conservative leverage position. Return on equity has decreased to 6.7%, reflecting reduced profitability. The equity ratio is stable, suggesting a solid capital structure. Overall, the balance sheet shows financial stability, but the declining ROE is a concern.

Cash Flow

Watts Co., Ltd. has experienced a significant decline in operating and free cash flows, with negative free cash flow in the latest year. The operating cash flow to net income ratio is negative, indicating cash flow challenges. The free cash flow to net income ratio is also negative, highlighting potential liquidity issues. Cash flow management needs improvement to support operations and growth.

Breakdown	Aug 2025	Aug 2024	Aug 2023	Aug 2022	Aug 2021
Income Statement
Total Revenue	61.58B	61.26B	59.31B	58.35B	50.70B
Gross Profit	23.91B	23.59B	22.45B	22.28B	19.63B
EBITDA	2.34B	1.97B	1.10B	1.68B	1.97B
Net Income	870.00M	904.15M	250.58M	781.18M	965.83M
Balance Sheet
Total Assets	27.51B	30.28B	25.49B	25.60B	21.34B
Cash, Cash Equivalents and Short-Term Investments	6.19B	9.38B	5.65B	6.69B	6.17B
Total Debt	3.33B	3.28B	2.88B	3.01B	1.12B
Total Liabilities	14.48B	17.76B	13.52B	13.67B	10.12B
Stockholders Equity	13.03B	12.52B	11.96B	11.93B	11.22B
Cash Flow
Free Cash Flow	-2.73B	3.49B	-398.77M	1.06B	-383.70M
Operating Cash Flow	-1.77B	4.04B	221.06M	1.72B	378.26M
Investing Cash Flow	-1.08B	-538.15M	-667.97M	-975.79M	-778.97M
Financing Cash Flow	-351.25M	233.22M	-633.15M	-328.61M	-51.97M

Watts Co., Ltd. Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 639.00
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:2735, the sentiment is Negative. The current price of 639 is below the 20-day moving average (MA) of 660.74, below the 50-day MA of 653.58, and below the 200-day MA of 656.20, indicating a bearish trend. The MACD of -0.06 indicates Positive momentum. The RSI at 34.47 is Neutral, neither overbought nor oversold. The STOCH value of 37.50 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for JP:2735.

Watts Co., Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
8198	78 Outperform	¥115.36B	10.49	―	1.92%	2.30%	26.52%
9974	76 Outperform	¥159.63B	12.87	―	1.64%	10.13%	23.77%
2742	72 Outperform	¥96.39B	10.29	―	1.47%	7.75%	-1.68%
8194	72 Outperform	¥222.53B	12.33	―	2.43%	4.48%	13.17%
2735	63 Neutral	¥8.19B	9.60	―	3.67%	0.52%	-3.78%
Sector *	62 Neutral	$20.33B	14.63	-3.31%	3.23%	1.93%	-12.26%
9993	51 Neutral	¥12.85B	-31.29	―	2.32%	2.43%	50.53%