Sockets Inc. (3634) AI Stock Analysis

• Market Cap: ¥1.61B
• Dividend Yield: 0.42%
• Average Volume (3M): 6.35K
• Price to Earnings (P/E): ―
• Beta (1Y): 0.52
• Revenue Growth: 6.81%
• EPS Growth: 62.28%
• Country: JP
• Employees: 73
• Sector: Technology
• Sector Strength: 88
• Industry: Information Technology Services
• EPS (TTM): 8.03
• Shares Outstanding: 2,477,400
• 10 Day Avg. Volume: 2,380
• 30 Day Avg. Volume: 6,350
• PEG Ratio: -0.25
• Price to Book (P/B): 2.48
• Price to Sales (P/S): 1.32
• P/FCF Ratio: -9.01
• 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: 44 Neutral
• Price Target: ¥669.00 ▼(-3.74% Downside)

The score is held down primarily by weak financial performance, driven by persistent and widening losses and sustained negative free cash flow despite healthy gross margins. Technical indicators also lean bearish with price below key short/mid-term averages and negative momentum. Valuation provides only modest support because losses (negative P/E) reduce the usefulness of earnings-based valuation and the dividend yield is low.

Positive Factors

Conservative Balance Sheet

A debt-free balance sheet reduces financial risk and provides flexibility, allowing the company to navigate economic uncertainties without the burden of interest payments.

Revenue Growth

Stable revenue growth indicates resilience and potential for future expansion, suggesting the company can maintain its market position despite profitability challenges.

Healthy Gross Margins

Strong gross margins suggest efficient cost management at the production level, providing a foundation for potential profitability if operating costs are controlled.

Negative Factors

Widening Net Losses

Increasing net losses indicate deteriorating profitability, which can erode shareholder value and limit reinvestment opportunities, impacting long-term growth.

Negative Cash Flow

Persistent negative cash flow suggests the company is not generating sufficient internal funds to support operations, raising concerns about liquidity and financial sustainability.

Declining Equity

Declining equity due to ongoing losses reduces shareholder value and financial resilience, potentially limiting future growth and investment capacity.

Sockets Inc. Business Overview & Revenue Model

Company Description

Sockets Inc. engages in the development and provision of services, applications, and database for Internet platforms. It offers data services, cross-media recommendation, emotional metadata analysis services, specialized search services, integral system development and construction, and database service planning and developing. The company was incorporated in 2000 and is based in Tokyo, Japan.

How the Company Makes Money

Sockets Inc. generates revenue through the sale of its electronic components and software solutions. The company has established key partnerships with various electronics manufacturers and distributors, allowing it to reach a wide market. Revenue streams include direct sales of its proprietary products, licensing fees from software tools, and long-term supply contracts with major industry players. Additionally, Sockets Inc. benefits from providing custom engineering services and technical support to its clients, further contributing to its earnings.

Sockets Inc. Financial Statement Overview

Summary

Financial performance is weak: profitability has deteriorated with widening net losses and negative operating results despite solid gross margins. Cash flow is a major concern with negative operating and free cash flow through 2022–2025 and a sharp deterioration in 2025. The main offset is a conservatively financed balance sheet with no debt, though equity has been trending down due to ongoing losses.

Income Statement

Revenue has been relatively stable with modest growth in the last three years (2023–2025), but profitability has clearly deteriorated. Net losses widened from 2023 to 2025, and operating results remain negative despite healthy gross profitability (mid-to-high 40% gross margin range recently). The key weakness is that operating costs continue to outweigh gross profit, preventing a return to sustainable earnings.

Balance Sheet

The balance sheet is conservatively financed with no debt, which materially lowers financial risk and provides flexibility. However, equity has trended down meaningfully from 2021 to 2025, reflecting ongoing losses, and returns on equity are consistently negative (worsening into 2025). Overall strength comes from low leverage, while the main concern is continued erosion of shareholder value if losses persist.

Cash Flow

Cash generation is a major pressure point: operating cash flow and free cash flow are negative in 2022–2025, including a sharp deterioration in 2025 versus 2024. While free cash flow has generally tracked net income directionally, the business is currently burning cash rather than funding itself internally, which raises execution and liquidity risk if the trend continues.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	1.04B	1.02B	994.61M	873.19M	994.29M
Gross Profit	475.93M	468.71M	506.26M	425.49M	469.92M
EBITDA	-138.50M	-79.15M	-27.82M	-83.17M	9.53M
Net Income	-139.13M	-100.26M	-26.89M	-150.24M	-51.44M
Balance Sheet
Total Assets	814.73M	970.85M	1.04B	1.05B	1.21B
Cash, Cash Equivalents and Short-Term Investments	464.96M	678.66M	722.56M	788.11M	793.97M
Total Debt	0.00	0.00	0.00	0.00	0.00
Total Liabilities	262.48M	264.80M	224.33M	200.01M	203.76M
Stockholders Equity	552.25M	706.05M	813.05M	854.64M	1.00B
Cash Flow
Free Cash Flow	-151.98M	-15.73M	-55.59M	-23.87M	35.71M
Operating Cash Flow	-151.77M	-14.86M	-44.79M	-14.06M	57.28M
Investing Cash Flow	-54.59M	-21.63M	-13.40M	15.52M	-21.57M
Financing Cash Flow	-7.33M	-7.42M	-7.36M	-7.33M	-7.36M

Sockets Inc. Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 695.00
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:3634, the sentiment is Neutral. The current price of 695 is above the 20-day moving average (MA) of 652.50, above the 50-day MA of 689.56, and above the 200-day MA of 644.94, indicating a neutral trend. The MACD of -13.45 indicates Negative momentum. The RSI at 46.14 is Neutral, neither overbought nor oversold. The STOCH value of 57.84 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for JP:3634.

Sockets Inc. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
3908	68 Neutral	¥1.91B	13.40	―	―	-10.98%	―
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
9240	51 Neutral	¥2.59B	27.54	―	―	6.61%	12.06%
9250	50 Neutral	¥1.59B	-3.02	―	―	5.17%	―
4316	47 Neutral	¥3.24B	-16.40	―	―	11.96%	-453.36%
7093	45 Neutral	¥1.30B	-26.99	―	―	1.68%	73.17%
3634	44 Neutral	¥1.61B	-34.11	―	0.42%	6.81%	62.28%