ES Networks Co., Ltd. (5867) AI Stock Analysis

• Market Cap: ¥3.74B
• Dividend Yield: 3.54%
• Average Volume (3M): 1.51K
• Price to Earnings (P/E): 16.8
• Beta (1Y): 0.34
• Revenue Growth: 13.81%
• EPS Growth: 64.18%
• Country: JP
• Employees: 231
• Sector: General
• Sector Strength: N/A
• Industry: Consulting Services
• EPS (TTM): 18.29
• Shares Outstanding: 3,148,100
• 10 Day Avg. Volume: 1,440
• 30 Day Avg. Volume: 1,510
• PEG Ratio: -0.61
• Price to Book (P/B): 2.15
• Price to Sales (P/S): 1.10
• P/FCF Ratio: 24.00
• 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: 64 Neutral
• Price Target: ¥1,336.00 ▲(2.14% Upside)
• Action: Downgraded Date: 02/18/26
• Date: Action: Downgraded 02/18/26

The score is driven primarily by solid underlying financial health (growth and a de-risked balance sheet) but is held back by 2025 margin pressure and weaker cash conversion. Technical indicators also lean mildly bearish in the near term, while valuation is supported by a strong dividend yield and a moderate P/E.

Positive Factors

Consistent revenue growth

Sustained top-line growth from 2022–2025 implies stable end-market demand and successful commercial execution. Over a multi-quarter horizon this supports recurring service contracts, scale benefits, and capacity to fund incremental investments without relying on one-time gains, bolstering long-term earnings resilience.

Conservative leverage

A materially lower debt-to-equity ratio reduces financial risk and increases strategic optionality. With a conservative capital structure the company can better absorb cyclical weakness, finance selective infrastructure or cloud investments, and pursue partnership or M&A opportunities without immediate balance-sheet strain.

Stable gross margins and FCF recovery

Mid-40% gross margins indicate persistent pricing or mix advantage in core network services, while FCF recovery to positive ¥157M shows improving cash generation. Together they support sustainable reinvestment in infrastructure and service delivery and underpin the quality of reported earnings over the medium term.

Negative Factors

Profitability erosion in 2025

A sharp year-over-year net margin decline signals rising cost pressure, adverse mix, or increased SG&A/headcount investment that compresses durable profitability. If margins remain depressed, returns on capital and internal funding capacity will weaken, constraining strategic initiatives and shareholder distributions.

Weak cash conversion

Operating cash flow materially below net income suggests earnings quality issues driven by working-capital swings or delayed collections. Persistent weak cash conversion limits the firm's ability to self-fund capex or absorb margin shocks, increasing reliance on external financing during investment cycles.

Step-up in total debt in 2025

Although leverage remains low overall, a recent increase in absolute debt raises medium-term refinancing and interest-cost risk if profitability is pressured. If margins and cash conversion do not recover, the debt step-up could constrain strategic flexibility and elevate downside in stressed scenarios.

ES Networks Co., Ltd. Business Overview & Revenue Model

Company Description

ES Networks Co., Ltd. (5867) is a leading company in the telecommunications and IT services sector, specializing in providing advanced network solutions and infrastructure development. The company focuses on delivering high-quality services in areas such as network design, installation, and maintenance, as well as offering cloud services and data management solutions to a diverse range of clients, including businesses and government entities.

How the Company Makes Money

ES Networks Co., Ltd. generates revenue primarily through its core services, which include network infrastructure projects, ongoing maintenance contracts, and cloud service subscriptions. The company earns money by charging clients for the design and implementation of telecommunications networks, as well as through long-term service agreements that ensure continuous support and system upgrades. Additionally, ES Networks might have strategic partnerships with technology providers, enabling them to enhance service offerings and reach new markets. These alliances can contribute significantly to the company's revenue by expanding its customer base and creating bundled service offerings.

ES Networks Co., Ltd. Financial Statement Overview

Summary

Revenue has grown consistently (2022–2025) and leverage is conservative with debt-to-equity improving materially, supporting balance-sheet strength. Offsetting this, 2025 profitability weakened (net margin down to ~6.4% from ~10.2% in 2024) and cash conversion is modest (operating cash flow below net income), making performance less consistent.

Income Statement

Revenue growth has been consistently positive from 2022–2025 (roughly low-single-digit to low-teens), showing healthy demand. However, profitability softened in 2025: net margin fell to ~6.4% (from ~10.2% in 2024) and EBIT/EBITDA margins also declined, suggesting cost pressure or mix/headcount investment. Gross margin stayed relatively stable in the mid-40% range, indicating core pricing power remains decent even as below-the-line profitability fluctuates.

Balance Sheet

Leverage looks conservative overall, with debt-to-equity improving materially from ~0.75 (2021) to ~0.23 (2025), which reduces financial risk and increases flexibility. Equity has grown steadily alongside assets, supporting a stronger capital base. The main watch item is the step-up in total debt in 2025 versus 2024, which is not alarming given the low ratio, but worth monitoring if profitability remains pressured.

Cash Flow

Cash generation is positive but uneven. Free cash flow recovered to ¥157M in 2025 after a negative year in 2023, and free cash flow is close to net income in 2024–2025, which supports earnings quality. The weakness is operating cash flow relative to net income, which is modest (about ~0.57x in 2024 and ~0.28x in 2025), implying working-capital swings or less efficient cash conversion recently.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	3.05B	3.42B	2.95B	2.71B	2.65B	2.33B
Gross Profit	1.40B	1.52B	1.34B	1.26B	1.24B	989.71M
EBITDA	319.03M	316.82M	445.24M	223.78M	243.81M	221.58M
Net Income	313.99M	217.54M	301.66M	136.80M	143.15M	122.64M
Balance Sheet
Total Assets	2.07B	2.69B	2.28B	2.22B	2.38B	2.40B
Cash, Cash Equivalents and Short-Term Investments	1.17B	1.47B	1.39B	1.21B	1.38B	1.67B
Total Debt	126.00M	395.04M	277.06M	538.00M	770.18M	866.03M
Total Liabilities	475.76M	861.01M	710.00M	823.00M	1.12B	1.21B
Stockholders Equity	1.52B	1.75B	1.50B	1.33B	1.21B	1.16B
Cash Flow
Free Cash Flow	0.00	157.10M	369.00M	-48.00M	130.80M	196.64M
Operating Cash Flow	0.00	164.47M	374.00M	124.00M	132.04M	218.64M
Investing Cash Flow	0.00	-71.63M	218.44M	-66.00M	-315.24M	149.18M
Financing Cash Flow	0.00	-16.70M	-442.60M	-315.00M	-178.74M	-195.38M

ES Networks Co., Ltd. Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 1308.00
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:5867, the sentiment is Negative. The current price of 1308 is above the 20-day moving average (MA) of 1251.10, above the 50-day MA of 1257.78, and above the 200-day MA of 1185.24, indicating a neutral trend. The MACD of -13.60 indicates Positive momentum. The RSI at 40.85 is Neutral, neither overbought nor oversold. The STOCH value of 23.01 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for JP:5867.

ES Networks Co., Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
9644	72 Outperform	¥25.24B	23.09	―	3.50%	15.91%	36.39%
7033	71 Outperform	¥24.79B	13.23	―	2.18%	17.87%	5.31%
9168	68 Neutral	¥12.86B	8.54	―	1.04%	23.25%	14.29%
5867	64 Neutral	¥3.74B	16.83	―	3.54%	13.81%	64.18%
4792	64 Neutral	¥32.76B	14.32	―	4.39%	2.46%	-31.77%
9556	63 Neutral	¥29.04B	19.22	―	―	16.77%	39.98%
Sector *	55 Neutral	$6.65B	3.83	-15.92%	6.20%	10.91%	7.18%