Headwaters Co., Ltd. (4011) AI Stock Analysis

• Market Cap: ¥11.08B
• Dividend Yield: N/A
• Average Volume (3M): 23.83K
• Price to Earnings (P/E): 61.7
• Beta (1Y): 1.71
• Revenue Growth: 34.56%
• EPS Growth: 4.59%
• Country: JP
• Employees: 240
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 25.82
• Shares Outstanding: 3,844,144
• 10 Day Avg. Volume: 32,270
• 30 Day Avg. Volume: 23,833
• PEG Ratio: 0.29
• Price to Book (P/B): 17.61
• Price to Sales (P/S): 7.68
• P/FCF Ratio: 189.34
• 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: 58 Neutral
• Price Target: ¥3,048.00 ▲(5.58% Upside)

The score is supported by strong financial performance, led by the debt-free balance sheet and improved 2024 profitability and growth. It is meaningfully tempered by weak technicals (trading below key moving averages) and an expensive valuation (high P/E) with no dividend support, plus cash-flow quality concerns versus reported earnings.

Positive Factors

Debt-free balance sheet

A zero‑debt, equity‑building balance sheet grants durable financial flexibility: management can fund R&D, product investment or small M&A without taking leverage, better absorb downturns, and avoid interest expense volatility—supporting long‑term strategic optionality.

Sustained revenue scaling

Meaningful top‑line growth over multiple years indicates a scalable product offering and improving market traction. Continued revenue expansion supports operating leverage, funds reinvestment in product and sales, and underpins the company’s ability to grow market share over the medium term.

Improved profitability and ROE

A rebound to double‑digit operating margins and high ROE demonstrates more efficient capital use and improved earnings power. If sustained, these metrics support stronger cash generation, capacity to reinvest or return capital, and higher resilience to competitive pressure over time.

Negative Factors

Weak operating cash conversion

Operating cash flow at roughly 27% of reported net income signals weak conversion and potential working‑capital or accrual issues. Persistent low OCF limits internal funding for growth initiatives, raises dependence on external finance, and puts long‑term pressure on capital allocation flexibility.

Volatile free cash flow growth

High variability in free cash flow reduces predictability of available funds for capex, R&D, or shareholder returns. This instability forces conservative cash reserves or episodic financing, complicating multi‑year planning and weakening confidence in sustainably funding strategic investments.

Historic earnings and margin swings

Large historical margin swings imply exposure to cyclical demand, pricing pressure or inconsistent operating leverage. Such volatility undermines confidence that the 2024 rebound is durable, complicates forecasting, and increases execution risk for long‑term investors and management planning.

Headwaters Co., Ltd. Business Overview & Revenue Model

Company Description

Headwaters Co.,Ltd engages in planning and developing artificial intelligence (AI) applications in Japan. It is also involved in the digital transformation, AI platform operation, cloud service operation, cloud robotics service, and robot application production activities. The company was founded in 2005 and is headquartered in Tokyo, Japan.

How the Company Makes Money

Headwaters Co., Ltd. makes money primarily through the sale of its AI solutions and services. The company's revenue streams include licensing fees from its proprietary AI software, custom AI solution development for specific client needs, and ongoing service contracts for AI implementation and maintenance. Additionally, Headwaters Co., Ltd. may engage in strategic partnerships with other technology firms to expand its market reach and enhance its product offerings, thereby driving further revenue growth. These partnerships can also lead to joint ventures or collaborative projects where revenue is shared based on mutual agreements.

Headwaters Co., Ltd. Financial Statement Overview

Summary

Strong revenue scaling and a sharp profitability rebound in 2024 alongside a very conservative, debt-free balance sheet with rising equity and attractive ROE. The key drag is cash-flow quality/consistency: operating cash flow is low versus net income in 2023–2024 and free-cash-flow growth has been volatile.

Income Statement

Revenue has scaled meaningfully over time (from ~¥1.07B in 2019 to ~¥2.91B in 2024), with 2024 showing strong year-over-year growth (11.1%). Profitability also improved sharply in 2024, with net margin rising to ~9.4% (vs. ~3.1% in 2023) and operating margin improving to ~10.6%. The key weakness is volatility: margins were very strong in 2020, compressed materially in 2021–2023, and then rebounded in 2024—suggesting earnings power is not yet consistently stable.

Balance Sheet

The balance sheet is conservatively positioned with zero debt in recent years (2020–2024) and a track record of building equity (stockholders’ equity rising from ~¥0.38B in 2019 to ~¥1.27B in 2024). Returns on equity are attractive in the latest period (~21.5% in 2024), indicating efficient use of capital. The main risk factor is less about leverage and more about ensuring the recent profitability rebound is durable, since ROE has also shown meaningful swings historically.

Cash Flow

Free cash flow is positive each year and conversion from earnings to free cash flow is generally solid (free cash flow running at ~0.82x of net income in 2023–2024). However, operating cash flow is relatively low versus accounting earnings in the most recent year (operating cash flow is ~0.27x of net income in 2024, similar in 2023), which can indicate working-capital drag or timing effects. Free cash flow growth is also highly volatile (including a very large jump in 2024 off a smaller base), reducing confidence in near-term consistency.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	3.21B	2.91B	2.32B	1.57B	1.17B	1.15B
Gross Profit	1.36B	1.24B	855.09M	645.54M	524.26M	547.95M
EBITDA	100.48M	327.00M	110.03M	121.43M	70.87M	161.91M
Net Income	119.39M	272.79M	70.68M	75.14M	27.04M	153.12M
Balance Sheet
Total Assets	1.66B	1.80B	1.29B	1.17B	973.21M	936.91M
Cash, Cash Equivalents and Short-Term Investments	833.10M	843.23M	897.90M	818.61M	765.55M	753.50M
Total Debt	0.00	0.00	0.00	0.00	0.00	0.00
Total Liabilities	448.06M	527.79M	332.58M	293.80M	172.91M	180.40M
Stockholders Equity	1.20B	1.27B	958.44M	875.44M	800.30M	756.51M
Cash Flow
Free Cash Flow	0.00	117.83M	71.44M	43.41M	45.34M	172.21M
Operating Cash Flow	0.00	144.41M	87.66M	84.27M	48.08M	179.36M
Investing Cash Flow	0.00	-210.97M	-13.48M	-31.21M	-52.78M	-8.98M
Financing Cash Flow	0.00	10.25M	5.40M	0.00	16.75M	180.47M

Headwaters Co., Ltd. Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 2887.00
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:4011, the sentiment is Negative. The current price of 2887 is below the 20-day moving average (MA) of 3132.55, below the 50-day MA of 2954.02, and below the 200-day MA of 3483.05, indicating a bearish trend. The MACD of -20.31 indicates Positive momentum. The RSI at 40.86 is Neutral, neither overbought nor oversold. The STOCH value of 17.36 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for JP:4011.

Headwaters Co., Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
3937	68 Neutral	¥12.70B	12.80	―	3.78%	0.43%	44.79%
4193	63 Neutral	¥11.24B	35.95	―	2.81%	12.49%	-57.87%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
4011	58 Neutral	¥11.08B	61.71	―	―	34.56%	4.59%
4425	54 Neutral	¥17.16B	-28.91	―	―	36.08%	-7.71%
4169	45 Neutral	¥12.02B	12.92	―	―	14.25%	―
3823	43 Neutral	¥6.97B	-34.87	―	―	134.28%	94.74%

Headwaters Co., Ltd. Corporate Events

Headwaters Co., Ltd. Reports Q3 2025 Financial Results with Increased Sales but Declined Profits

Headwaters Co., Ltd. reported its consolidated financial results for the third quarter ending September 30, 2025, showing a significant increase in net sales by 29.4% year-on-year to ¥2,702 million. However, the company experienced a decline in operating profit, ordinary profit, and profit attributable to owners of the parent, with decreases of 54.7%, 67.4%, and 68.8% respectively, compared to the previous year. The company’s total assets increased to ¥3,727 million, but the equity-to-asset ratio dropped to 35.4% from 70.4% at the end of 2024. The company has not revised its previously announced consolidated forecast for the fiscal year ending December 31, 2025.