DIGITAL HEARTS HOLDINGS Co., Ltd. (3676) AI Stock Analysis

• Market Cap: ¥19.40B
• Dividend Yield: 2.36%
• Average Volume (3M): 70.74K
• Price to Earnings (P/E): 29.3
• Beta (1Y): 0.90
• Revenue Growth: -2.68%
• EPS Growth: -12.83%
• Country: JP
• Employees: 1,870
• Sector: Technology
• Sector Strength: 88
• Industry: Information Technology Services
• EPS (TTM): 29.80
• Shares Outstanding: 23,890,800
• 10 Day Avg. Volume: 80,220
• 30 Day Avg. Volume: 70,740
• PEG Ratio: 0.14
• Price to Book (P/B): 2.44
• Price to Sales (P/S): 0.55
• P/FCF Ratio: 8.11
• 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): 84.18
• Revenue Forecast (FY): ¥39.69B

• Rating: 73 Outperform
• Price Target: ¥961.00 ▲(5.72% Upside)
• Action: Reiterated Date: 11/01/25
• Date: Action: Reiterated 11/01/25

DIGITAL HEARTS HOLDINGS Co., Ltd. has a strong financial foundation with consistent revenue growth and effective cash flow management, which are the most significant factors driving the score. The technical analysis presents a mixed outlook, with neutral momentum indicators. The valuation is reasonable, with a moderate P/E ratio and a decent dividend yield. The absence of earnings call and corporate events data has no impact on the overall score.

Positive Factors

Strong free cash flow growth

The company’s free cash flow expanded materially over five years, showing durable cash conversion. Robust FCF improves financial flexibility for capex, dividends, M&A or debt reduction, and indicates underlying service contracts generate reliable cash to fund strategic initiatives over the medium term.

Improving margins and scale

Substantial top-line expansion with sustained gross margins and rising net profit margin reflects operational leverage and disciplined cost control. Scale in outsourced QA and services supports margin sustainability and competitive pricing, reinforcing long-term profitability potential within core markets.

Balanced capital structure

Moderate leverage combined with a high equity ratio indicates a conservative solvency profile that reduces refinancing risk. Improved ROE shows more effective use of capital. This balance supports investments and cushions cyclical downturns without excessive financial strain.

Negative Factors

Recent revenue contraction

A recent negative revenue growth reading suggests near-term client demand softness or project timing effects. For a service-led business, repeated top-line contractions can pressure utilization, underused capacity, and margin resilience, reducing the certainty of cash flows over the coming quarters.

Notable absolute debt level

Although leverage ratios look moderate, the company’s sizeable absolute debt increases sensitivity to interest rate rises or refinancing stress. If revenues weaken or cash generation dips, servicing and reducing that debt could constrain capital allocation and strategic flexibility over the medium term.

Earnings volatility / EPS decline

A sharp EPS decline indicates earnings are volatile and possibly exposed to cyclical demand, contract timing, or one-offs. This volatility undermines predictability for reinvestment, dividends, and valuation of future cash flows, raising execution risk for long-term strategic plans.

DIGITAL HEARTS HOLDINGS Co., Ltd. Business Overview & Revenue Model

Company Description

DIGITAL HEARTS HOLDINGS Co., Ltd., together with its subsidiaries, engages in debugging, media, and other businesses. It provides debug testing and reporting services for consumer games, mobile and online games, arcade games, etc.; one-stop solutions, such as translation, LQA, and marketing support for game makers to develop overseas markets; and support services in the creating of content, including game development and CG video creation, etc. The company also operates 4Gamer.net, a website for distributing information about computer games and online games, and hardware; and publishes news, as well as distributes movies, free trials, weekly publications, and other content. In addition, it offers testing services for IT-related software, including websites and operations systems; solutions for the development of AI application and testing automation; and security services. Further, the company provides various IT services, such as system development, maintenance, and operation support for IT systems. The company was formerly known as Hearts United Group Co., Ltd. and changed its name to DIGITAL HEARTS HOLDINGS Co., Ltd. in July 2018. DIGITAL HEARTS HOLDINGS Co., Ltd. was founded in 2001 and is headquartered in Tokyo, Japan.

How the Company Makes Money

DIGITAL HEARTS generates revenue through multiple channels, with key streams including the sale of mobile games and in-app purchases, software development contracts, and quality assurance services for other developers. The company partners with various gaming companies and content creators to enhance their offerings, thereby securing contracts that provide consistent income. Additionally, they may earn revenue through licensing agreements and collaborations with other firms in the digital content space, leveraging their expertise in testing and consulting to assist clients in optimizing their products for market success.

DIGITAL HEARTS HOLDINGS Co., Ltd. Financial Statement Overview

Summary

DIGITAL HEARTS HOLDINGS Co., Ltd. exhibits strong financial performance with consistent revenue growth, improving profitability margins, and a stable financial position. The company demonstrates sound cash flow generation, supporting its operations and growth strategies. While there is notable debt on the balance sheet, the company's equity ratio and cash flow capabilities mitigate potential risks.

Income Statement

DIGITAL HEARTS HOLDINGS Co., Ltd. has demonstrated robust revenue growth, with a revenue increase from ¥21.1 billion in 2020 to ¥39.7 billion in 2025. The gross profit margin remains healthy at around 25.5% in 2025, indicating efficient cost management. Net profit margin improved significantly, reaching 1.6% in 2025 from a low of 0.5% in 2024, showcasing enhanced profitability. EBIT and EBITDA margins have also shown positive trends, suggesting strong operational performance.

Balance Sheet

The company maintains a strong equity base with a debt-to-equity ratio of 0.58 in 2025, reflecting a balanced capital structure. ROE improved to 7.03% in 2025, demonstrating effective use of equity capital. The equity ratio stands at 44.9%, indicating a solid financial position with a substantial portion of assets financed by equity, reducing financial risk. However, the total debt level remains significant, which could pose potential risks if not managed carefully.

Cash Flow

The operating cash flow to net income ratio is robust, indicating strong cash generation relative to net income. Free cash flow has grown steadily, with a significant increase in free cash flow from ¥829 million in 2020 to ¥2.69 billion in 2025. The free cash flow to net income ratio is favorable, suggesting efficient conversion of profits to cash flows. Overall, the company's cash flow management appears effective, supporting its operational and strategic needs.

Breakdown	TTM	Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Income Statement
Total Revenue	39.29B	39.75B	38.79B	36.52B	29.18B	22.67B
Gross Profit	10.32B	10.14B	10.09B	10.63B	8.39B	6.43B
EBITDA	3.08B	2.70B	1.91B	3.18B	3.49B	1.92B
Net Income	881.41M	629.46M	176.93M	799.55M	1.78B	974.49M
Balance Sheet
Total Assets	19.71B	19.95B	21.10B	19.58B	17.57B	14.34B
Cash, Cash Equivalents and Short-Term Investments	7.22B	7.59B	6.90B	6.50B	5.24B	5.23B
Total Debt	5.39B	5.20B	7.10B	5.11B	5.59B	4.80B
Total Liabilities	10.45B	10.69B	12.25B	10.11B	9.99B	8.02B
Stockholders Equity	8.97B	8.95B	8.42B	8.81B	7.00B	5.70B
Cash Flow
Free Cash Flow	0.00	2.69B	946.83M	1.82B	2.70B	1.10B
Operating Cash Flow	0.00	3.12B	1.76B	2.85B	3.08B	1.42B
Investing Cash Flow	0.00	-147.41M	-2.37B	-1.90B	-2.54B	-1.81B
Financing Cash Flow	0.00	-2.41B	934.08M	141.47M	-546.57M	1.73B

DIGITAL HEARTS HOLDINGS Co., Ltd. Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 909.00
• 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:3676, the sentiment is Negative. The current price of 909 is above the 20-day moving average (MA) of 879.55, below the 50-day MA of 909.88, and below the 200-day MA of 935.49, indicating a bearish trend. The MACD of -21.88 indicates Positive momentum. The RSI at 43.58 is Neutral, neither overbought nor oversold. The STOCH value of 49.15 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for JP:3676.

DIGITAL HEARTS HOLDINGS Co., Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
4498	75 Outperform	¥20.97B	21.48	―	0.90%	17.75%	44.95%
3676	73 Outperform	¥19.40B	29.34	―	2.36%	-2.68%	-12.83%
4442	73 Outperform	¥9.77B	16.05	―	0.95%	9.36%	-1.69%
6050	69 Neutral	¥19.28B	23.88	―	2.13%	-0.62%	-11.36%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
3968	56 Neutral	¥18.94B	13.86	―	1.72%	26.24%	29.73%
3657	50 Neutral	¥11.53B	-16.40	―	5.03%	3.97%	63.06%

DIGITAL HEARTS HOLDINGS Co., Ltd. Corporate Events

DIGITAL HEARTS Adjusts Start Date of Capital and Business Alliance with GTL Media

DIGITAL HEARTS HOLDINGS Co., Ltd. announced a revision to the schedule for its planned capital and business alliance with GTL Media, Inc., changing the expected commencement date from February 6, 2026, to February 12, 2026. The adjustment stems from the progress of practical procedures related to the share acquisition, and while the delay is minor, it slightly shifts the timeline for when the alliance—and the associated consolidation prospects—will begin to impact the company’s operations and strategic collaboration with GTL Media.

The most recent analyst rating on (JP:3676) stock is a Hold with a Yen1023.00 price target. To see the full list of analyst forecasts on DIGITAL HEARTS HOLDINGS Co., Ltd. stock, see the JP:3676 Stock Forecast page.

DIGITAL HEARTS HOLDINGS Lifts Profit Despite Lower Sales, Keeps Full-Year Outlook and Dividend Plan Intact

DIGITAL HEARTS HOLDINGS reported consolidated net sales of ¥29.1 billion for the nine months ended December 31, 2025, down 4.4% year on year, but achieved strong profit growth with operating income up 27.4% to ¥2.34 billion and profit attributable to owners of parent up 3.8% to ¥1.42 billion, supported by improved profitability despite weaker top-line performance. Total assets rose to ¥22.0 billion and shareholders’ equity increased, with a slightly lower equity ratio of 43.9%, while the company maintained its full-year forecast of flat sales at ¥39.75 billion and higher earnings, projecting an 8.6% rise in operating income and a 163.7% surge in full-year profit. The group also kept its dividend plan unchanged at ¥23 per share for the fiscal year, reflecting confidence in cash generation, and expanded its consolidation scope by adding HUWIZ SOLUTIONS INC., indicating ongoing strategic efforts to broaden its service capabilities and reinforce future earnings potential.

The most recent analyst rating on (JP:3676) stock is a Hold with a Yen1023.00 price target. To see the full list of analyst forecasts on DIGITAL HEARTS HOLDINGS Co., Ltd. stock, see the JP:3676 Stock Forecast page.

DIGITAL HEARTS HOLDINGS Releases Segment-Based Results for Nine-Month Period

DIGITAL HEARTS HOLDINGS Co., Ltd. has released presentation materials for the nine months ended December 31, 2025, outlining its financial performance by business segment. The disclosure clarifies that the reported net sales figures for each segment include inter-segment sales or transfers and that segment income is based on operating income, offering investors greater transparency into how the company evaluates and reports the profitability of its various operations.

The most recent analyst rating on (JP:3676) stock is a Hold with a Yen1023.00 price target. To see the full list of analyst forecasts on DIGITAL HEARTS HOLDINGS Co., Ltd. stock, see the JP:3676 Stock Forecast page.

DIGITAL HEARTS Strikes Alliance with GameScribes to Build Global One-Stop Game Localization Platform

DIGITAL HEARTS HOLDINGS has agreed to enter a capital and business alliance with U.S.-based game localization firm GTL Media, Inc., known as GameScribes, and is exploring the possibility of making it a consolidated subsidiary. The company will initially acquire a 20% stake in GameScribes for USD 1 million via a third-party allotment and may purchase the remaining shares to make it a wholly owned subsidiary if GameScribes meets performance targets for the fiscal year ending December 2028, details of which will be disclosed once determined. By combining DIGITAL HEARTS’ strengths in Asian language localization, debugging and game development support with GameScribes’ established network of over 900 freelance professionals and expertise in European, Russian, Arabic and Latin American languages, and layering in the “ella” AI engine, the partners aim to offer high-quality multilingual translation and LQA services as a seamless one-stop solution, positioning DIGITAL HEARTS to strengthen its role as a global quality partner for the entertainment industry and accelerate both companies’ international expansion.

The most recent analyst rating on (JP:3676) stock is a Hold with a Yen1023.00 price target. To see the full list of analyst forecasts on DIGITAL HEARTS HOLDINGS Co., Ltd. stock, see the JP:3676 Stock Forecast page.