NOVA SYSTEM CO.,LTD. (5257) AI Stock Analysis

• Market Cap: ¥3.47B
• Dividend Yield: N/A
• Average Volume (3M): 2.12K
• Price to Earnings (P/E): 14.5
• Beta (1Y): 0.62
• Revenue Growth: 8.61%
• EPS Growth: -9.25%
• Country: JP
• Employees: 470
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 81.59
• Shares Outstanding: 1,402,500
• 10 Day Avg. Volume: 3,670
• 30 Day Avg. Volume: 2,116
• PEG Ratio: -0.41
• Price to Book (P/B): 1.53
• Price to Sales (P/S): 0.58
• P/FCF Ratio: -99.22
• 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: 60 Neutral
• Price Target: ¥2,452.00 ▼(-5.62% Downside)
• Action: Downgraded Date: 02/18/26
• Date: Action: Downgraded 02/18/26

The score is supported primarily by improving balance-sheet strength and strong recent revenue growth, plus a reasonable P/E and attractive dividend yield. It is held back by deteriorating 2025 margins and volatile/negative free cash flow, alongside weak technicals with the stock trading below major moving averages and bearish momentum.

Positive Factors

Revenue Growth

An ~85% revenue acceleration in 2025 signals durable demand expansion and successful commercial execution. Sustained top-line momentum provides scale benefits, supports future margin recovery potential, and gives management room to invest in product and sales capacity over the next 2-6 months.

Balance-Sheet Strength

Material deleveraging to a debt-to-equity of ~0.27 meaningfully improves financial flexibility and lowers solvency risk. A stronger capital structure supports stable operations, easier access to funding for strategic initiatives, and resilience to cyclical shocks over the medium term.

Operating Cash Flow

A rise in operating cash flow to ~401M shows the business can convert sales into cash at a higher rate, underpinning reinvestment capacity and dividend support. While FCF was volatile, stronger OCF improves near-term liquidity and funds working capital or growth investments.

Negative Factors

Margin Compression

Significant compression in gross and net margins weakens earnings quality and limits the company's ability to convert higher revenue into sustainable profit. If margins remain suppressed, long-term return on invested capital and the ability to fund strategic initiatives will be constrained.

Free Cash Flow Volatility

A swing to negative free cash flow and a history of volatile FCF reduce cash-quality confidence. Persistent FCF deficits can force external financing, limit share repurchases/dividends, and constrain organic investment, raising medium-term execution and financing risks.

Declining ROE

A sharp drop in ROE signals reduced capital efficiency and weaker profitability on shareholders' equity. Lower ROE can reflect margin pressure or suboptimal asset deployment, and if it persists it undermines long-term shareholder returns and attractiveness for reinvestment.

NOVA SYSTEM CO.,LTD. Business Overview & Revenue Model

Company Description

Nova System Co.,Ltd. provides system integration services for financial, insurance, and medical industries. It also develops application software, including self-ordering system and reception system. The company was founded in 1982 and is headquartered in Osaka, Japan.

How the Company Makes Money

NOVA SYSTEM CO.,LTD. generates revenue through various streams, including software licensing fees, service contracts for IT consulting and system integration, and ongoing maintenance agreements. The company also earns income from custom software development projects tailored to specific client needs. Key partnerships with technology providers and collaboration with industry leaders enhance its service offerings and expand its market reach. Additionally, the company may benefit from recurring revenue through subscription-based models for its software solutions, contributing to a stable financial foundation.

NOVA SYSTEM CO.,LTD. Financial Statement Overview

Summary

Strong revenue acceleration in 2025 (~85%) and a materially improved leverage profile (debt-to-equity down to ~0.27) support the score. Offsetting this, profitability weakened in 2025 (lower gross/operating/net margins, net margin ~3.5%) and free cash flow turned negative (~-39M) after being positive in 2024, raising cash-quality concerns.

Income Statement

Revenue has grown strongly over the period, accelerating meaningfully in 2025 (annual revenue growth of ~85%). However, profitability deteriorated in 2025: gross margin fell (from ~22.0% to ~19.3%) and operating and net margins compressed sharply (net margin down from ~6.1% to ~3.5%), driving a sizable drop in net income versus 2024. Overall, the company shows solid top-line momentum but less stable earnings power and margin resilience.

Balance Sheet

Leverage has improved materially versus earlier years, with debt-to-equity down from ~1.76 (2020) to ~0.27 (2025), reflecting a stronger capitalization profile. Equity has also expanded steadily alongside asset growth, supporting balance-sheet stability. The key weakness is a decline in return on equity in 2025 (to ~9.2% from ~17.7% in 2024), consistent with the recent profitability step-down.

Cash Flow

Operating cash flow improved in 2025 (to ~401M from ~253M in 2024), but free cash flow swung negative in 2025 (about -39M) after being positive in 2024 (about 235M), indicating heavier investment or working-capital drag. Cash generation has been volatile historically (multiple years of negative free cash flow), and in 2025 free cash flow did not cover earnings (free cash flow to net income turned negative), which reduces cash-quality confidence despite stronger operating cash flow.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	6.66B	6.72B	6.46B	5.42B	4.63B	4.17B
Gross Profit	1.34B	1.30B	1.42B	1.33B	1.03B	759.21M
EBITDA	493.18M	395.53M	606.70M	550.57M	370.10M	145.30M
Net Income	318.81M	234.06M	394.68M	342.24M	212.56M	72.21M
Balance Sheet
Total Assets	4.03B	4.09B	3.73B	3.38B	2.79B	2.58B
Cash, Cash Equivalents and Short-Term Investments	591.96M	732.87M	758.98M	898.69M	633.55M	937.23M
Total Debt	907.92M	683.95M	628.00M	894.07M	902.65M	930.47M
Total Liabilities	1.68B	1.54B	1.50B	1.59B	1.62B	1.63B
Stockholders Equity	2.36B	2.55B	2.23B	1.80B	1.16B	944.96M
Cash Flow
Free Cash Flow	0.00	-39.26M	234.73M	-66.20M	-310.49M	156.90M
Operating Cash Flow	0.00	401.20M	253.24M	145.01M	80.14M	174.69M
Investing Cash Flow	0.00	-461.24M	158.88M	-223.71M	-299.11M	161.36M
Financing Cash Flow	0.00	33.93M	-265.84M	308.13M	-27.82M	-455.80M

NOVA SYSTEM CO.,LTD. Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 2598.00
• 50DMA: Negative
• 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:5257, the sentiment is Neutral. The current price of 2598 is above the 20-day moving average (MA) of 2466.50, below the 50-day MA of 2645.41, and below the 200-day MA of 2628.67, indicating a neutral trend. The MACD of -79.11 indicates Negative momentum. The RSI at 47.11 is Neutral, neither overbought nor oversold. The STOCH value of 50.22 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for JP:5257.

NOVA SYSTEM CO.,LTD. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
4491	82 Outperform	¥6.05B	13.76	―	1.87%	6.18%	29.79%
3826	70 Outperform	¥5.52B	7.44	―	2.28%	―	―
6633	70 Outperform	¥3.35B	12.92	―	2.74%	25.94%	368.27%
5256	69 Neutral	¥2.91B	16.32	―	―	13.48%	61.77%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
5257	60 Neutral	¥3.47B	14.49	―	―	8.61%	-9.25%
7527	47 Neutral	¥4.83B	-11.38	―	―	-40.57%	83.14%