Nalnet Communications, Inc. (5870) AI Stock Analysis

• Market Cap: ¥5.53B
• Dividend Yield: 1.32%
• Average Volume (3M): 46.39K
• Price to Earnings (P/E): 14.1
• Beta (1Y): 0.96
• Revenue Growth: 18.31%
• EPS Growth: 102.31%
• Country: JP
• Employees: 95
• Sector: Services
• Sector Strength: N/A
• Industry: Personal Products & Services
• EPS (TTM): 31.43
• Shares Outstanding: 5,332,100
• 10 Day Avg. Volume: 49,520
• 30 Day Avg. Volume: 46,390
• PEG Ratio: -0.55
• Price to Book (P/B): 0.84
• Price to Sales (P/S): 0.34
• P/FCF Ratio: 8.25
• 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: 81 Outperform
• Price Target: ¥1,305.00 ▲(15.08% Upside)

Nalnet Communications, Inc. receives a strong overall stock score of 81, driven primarily by its robust financial performance and positive technical indicators. The company's valuation is also favorable, contributing to its attractiveness. While profitability and cash flow management could be improved, the current momentum and reasonable valuation make it a compelling investment opportunity.

Positive Factors

Recurring revenue model

Nalnet's subscription-based broadband and digital voice model creates predictable, recurring revenue that supports multi-year cash flow visibility. This durability aids capital planning for network upgrades, reduces volatility from one-time sales, and enhances customer lifetime value through retention and bundling.

Sustained top-line growth

Double-digit revenue growth reflects persistent demand for Nalnet's connectivity services and successful customer acquisition or ARPU expansion. Sustained revenue expansion enables scale benefits, better absorption of fixed network costs, and provides runway to invest in coverage and service upgrades over the next several quarters.

Moderate leverage and improving balance sheet

A 0.50 debt-to-equity ratio and recent debt reduction point to prudent leverage, preserving financial flexibility for capex and expansion. A balanced capital structure lowers refinancing risk and interest burden, supporting steady network investment and strategic initiatives without excessive financial strain.

Negative Factors

Thin net profit margins

A low and falling net margin limits retained earnings and resilience to cost shocks. Telecommunications capex and competitive pricing can compress margins further, constraining ability to fund growth internally and reducing tolerance for margin volatility over the medium term unless operating efficiency or pricing power improves.

Sharp free cash flow decline

A nearly 48% drop in free cash flow signals pressure on cash available for dividends, debt repayment, or network expansion. Even with solid operating cash to net income conversion, shrinking FCF suggests higher capex or working capital needs that could force financing choices and limit strategic flexibility in the medium term.

Low and falling return on equity

ROE under 7% and trending down indicates modest returns on shareholder capital versus peers. Persistent downward ROE can reflect competitive pressure, inefficient capital allocation, or rising costs, and may constrain long-term shareholder value creation unless profitability or asset efficiency improves.

Nalnet Communications, Inc. Business Overview & Revenue Model

Company Description

Nalnet Communications, Inc. engages in management and maintenance of vehicles. It provides its service to automobile-related companies such as auto leasing companies and individual users. It also offers business process outsourcing (BPO) services and sales of vehicles. The company was founded on July 18, 2019 and is headquartered in Kasugai, Japan.

How the Company Makes Money

Nalnet Communications generates revenue through multiple key streams including subscription fees for its broadband internet and digital voice services, as well as installation and equipment fees for new customers. The company operates on a recurring revenue model where customers pay monthly for their service packages. Additionally, Nalnet may partner with other technology firms to offer bundled services or co-branded products, which can enhance customer acquisition and retention. Strategic collaborations with local governments and businesses to expand infrastructure in underserved areas also contribute to revenue growth, as these initiatives often come with funding or incentives that support expansion efforts.

Nalnet Communications, Inc. Financial Statement Overview

Summary

Nalnet Communications, Inc. demonstrates robust revenue growth and stable operational performance. The balance sheet reflects moderate leverage and a balanced capital structure. However, there is room for improvement in profitability and cash flow management, particularly in enhancing net profit margins and free cash flow generation.

Income Statement

Nalnet Communications, Inc. has shown strong revenue growth, with a 11.34% increase from 2024 to 2025. The gross profit margin is healthy at 27.81%, and the net profit margin stands at 2.79%. However, the net profit margin has decreased from the previous year, indicating some pressure on profitability. The EBIT and EBITDA margins are stable, reflecting efficient operational management.

Balance Sheet

The company's balance sheet is solid, with a debt-to-equity ratio of 0.50, indicating moderate leverage. The return on equity is 6.95%, which is reasonable but shows a decline from previous years. The equity ratio is 34.57%, suggesting a balanced capital structure. The company has reduced its total debt, improving its financial stability.

Cash Flow

Nalnet Communications has experienced a decline in free cash flow, with a negative growth rate of -47.95%. The operating cash flow to net income ratio is 1.79, indicating strong cash generation relative to net income. However, the free cash flow to net income ratio has decreased, suggesting potential challenges in maintaining free cash flow levels.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022
Income Statement
Total Revenue	8.54B	7.67B	7.03B	6.42B
Gross Profit	2.38B	1.94B	2.18B	2.10B
EBITDA	874.61M	942.50M	1.11B	793.16M
Net Income	238.33M	305.14M	622.15M	199.23M
Balance Sheet
Total Assets	9.92B	9.57B	9.60B	9.42B
Cash, Cash Equivalents and Short-Term Investments	859.48M	1.03B	602.22M	683.14M
Total Debt	1.72B	2.13B	2.45B	2.80B
Total Liabilities	6.49B	6.46B	6.69B	6.94B
Stockholders Equity	3.43B	3.27B	2.91B	2.48B
Cash Flow
Free Cash Flow	348.94M	670.34M	261.89M	606.55M
Operating Cash Flow	427.58M	827.32M	374.12M	696.99M
Investing Cash Flow	-91.12M	-138.20M	-112.82M	-96.86M
Financing Cash Flow	-503.92M	-264.41M	-342.22M	-311.20M

Nalnet Communications, Inc. Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 1134.00
• 50DMA: Negative
• 100DMA: Positive
• 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:5870, the sentiment is Neutral. The current price of 1134 is above the 20-day moving average (MA) of 1100.30, above the 50-day MA of 1094.18, and above the 200-day MA of 869.52, indicating a neutral trend. The MACD of -14.92 indicates Positive momentum. The RSI at 44.74 is Neutral, neither overbought nor oversold. The STOCH value of 37.72 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for JP:5870.

Nalnet Communications, Inc. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
6060	82 Outperform	¥5.10B	10.09	―	2.39%	-0.64%	24.31%
5870	81 Outperform	¥5.53B	14.12	―	1.32%	18.31%	102.31%
2424	69 Neutral	¥3.54B	15.36	―	1.24%	6.77%	40.10%
Sector *	55 Neutral	$13.29B	17.42	10.03%	0.93%	7.13%	-12.93%
2437	50 Neutral	¥6.17B	-9.87	―	―	-24.31%	56.72%
7074	44 Neutral	¥1.93B	-9.21	―	―	-21.04%	76.41%
6181	41 Neutral	¥4.11B	-4.00	―	―	4.74%	-8577.95%