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

• Market Cap: ¥11.92B
• Dividend Yield: N/A
• Average Volume (3M): 23.83K
• Price to Earnings (P/E): 68.8
• Beta (1Y): 1.72
• 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: 3,840,144
• 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: 62 Neutral
• Price Target: ¥3,008.00 ▲(4.19% Upside)

The score is driven primarily by solid fundamental progress and a very low-risk balance sheet, but it is held back by weak technical trend signals and a high P/E valuation. Cash-flow quality and earnings consistency remain key risks despite the 2024 profitability rebound.

Positive Factors

Revenue Growth

Consistent revenue growth indicates strong market demand and effective business strategies, supporting long-term expansion potential.

Balance Sheet Health

A debt-free balance sheet with increasing equity provides financial stability and flexibility for future investments and growth.

Profitability Rebound

Improved profitability margins suggest enhanced operational efficiency and potential for sustained earnings growth.

Negative Factors

Profit Decline

A significant decline in profits indicates potential operational challenges or market pressures that could affect long-term profitability.

Cash Flow Volatility

Low operating cash flow relative to net income suggests potential liquidity issues and challenges in converting earnings into cash.

Equity-to-Asset Ratio Drop

A declining equity-to-asset ratio may indicate increased financial risk and reduced buffer against potential liabilities.

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

Headwaters Co., Ltd. exhibits strong financial health, driven by a 25.5% revenue growth and enhanced profitability with a net profit margin of 9.4%. The balance sheet is robust, featuring no debt and a high equity ratio of 70.3%. Although cash flow generation is solid, the cash conversion efficiency requires improvement, as indicated by the operating cash flow to net income ratio of 0.53.

Income Statement

Headwaters Co., Ltd. has demonstrated impressive revenue growth with a 25.5% increase from the previous year, indicating strong demand for its offerings. The gross profit margin stands at 42.6%, reflecting efficient cost management. Net profit margin has improved to 9.4%, showcasing enhanced profitability. However, the EBIT margin of 10.6% suggests room for operational improvements. Despite this, the EBITDA margin of 11.3% highlights strong cash generation from operations.

Balance Sheet

The company maintains a robust balance sheet with no debt, resulting in a favorable debt-to-equity ratio of 0. The equity ratio of 70.3% indicates a strong capital structure. Return on Equity (ROE) has improved to 21.5%, demonstrating effective utilization of shareholder funds. The absence of leverage minimizes financial risks, positioning the company for sustainable growth.

Cash Flow

Free cash flow has grown by 65.2%, reflecting better cash management. The operating cash flow to net income ratio of 0.53 suggests a need to enhance cash conversion efficiency. The free cash flow to net income ratio of 0.43 indicates that a significant portion of earnings is being converted into free cash flow, although further improvement is desirable.

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: Positive
• Last Price: 2887.00
• 50DMA: Positive
• 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:4011, the sentiment is Positive. The current price of 2887 is above the 20-day moving average (MA) of 2861.70, below the 50-day MA of 2979.06, and below the 200-day MA of 3522.16, indicating a neutral trend. The MACD of 35.40 indicates Negative momentum. The RSI at 59.17 is Neutral, neither overbought nor oversold. The STOCH value of 73.70 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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	¥12.95B	13.04	―	3.78%	0.43%	44.79%
4193	63 Neutral	¥11.20B	35.83	―	2.81%	12.49%	-57.87%
4011	62 Neutral	¥11.92B	68.83	―	―	34.56%	4.59%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
4425	54 Neutral	¥16.13B	-27.91	―	―	36.08%	-7.71%
4169	45 Neutral	¥12.53B	13.42	―	―	14.25%	―
3823	43 Neutral	¥6.97B	-66.20	―	―	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.