Nippon Gear Co., Ltd. (6356) AI Stock Analysis

• Market Cap: ¥11.85B
• Dividend Yield: 0.92%
• Average Volume (3M): 116.20K
• Price to Earnings (P/E): 7.9
• Beta (1Y): 1.28
• Revenue Growth: -1.79%
• EPS Growth: -8.54%
• Country: JP
• Employees: 393
• Sector: Consumer Cyclical
• Sector Strength: 84
• Industry: Auto - Parts
• EPS (TTM): 32.00
• Shares Outstanding: 14,280,000
• 10 Day Avg. Volume: 161,780
• 30 Day Avg. Volume: 116,203
• PEG Ratio: 6.22
• Price to Book (P/B): 0.55
• Price to Sales (P/S): 0.72
• P/FCF Ratio: 8.63
• 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: 76 Outperform
• Price Target: ¥944.00 ▲(10.67% Upside)

The score is primarily driven by strong financial performance (growth, profitability, and cash flow with conservative leverage) and supportive valuation from a low P/E. Technicals are the main offset, as the stock is below key short-term moving averages and momentum indicators show weakness/near-oversold conditions.

Positive Factors

Revenue Growth Trend

Sustained revenue growth and improving operating margins signal durable demand and better cost control across product lines. Over 2–6 months this underpins stronger cash generation, pricing power in B2B contracts, and the ability to reinvest in R&D and capacity to capture further industrial and automotive demand.

Free Cash Flow Strength

Consistent operating cash flow conversion and impressive free cash flow growth provide financial flexibility to fund capex, support long-term contracts, and reduce leverage. Durable FCF positions the company to invest in precision manufacturing, sustain innovation, and weather industry cyclicality without relying on external financing.

Conservative Balance Sheet

Low leverage and a high equity ratio reduce refinancing and liquidity risk, giving management scope to pursue strategic investments or absorb demand shocks. Over the medium term this stability supports credit access, funds for targeted M&A or capex, and resilience through automotive/industrial cycles.

Negative Factors

Return on Equity Weakness

A noted shortfall in ROE implies capital is not yet generating strong shareholder returns, limiting long-term attractiveness to equity investors. Improving asset efficiency or pricing, or reallocating capital toward higher-return projects, is needed to convert strong balance-sheet and cash flow positions into better equity returns.

Cyclicality of End Markets

Heavy exposure to automotive and industrial machinery markets creates structural revenue volatility tied to investment cycles and OEM demand. Over a multi-month horizon, downturns in vehicle production or industrial capex can depress orders and utilization, stressing margins despite solid underlying operations.

Limited Income Return to Shareholders

A sub-1% dividend yield provides little cash return to income-focused investors and narrows the shareholder base seeking yield. Coupled with modest ROE, this raises questions about the balance between retained earnings and shareholder distributions, potentially pressuring management to justify capital allocation decisions.

Nippon Gear Co., Ltd. Business Overview & Revenue Model

Company Description

Nippon Gear Co., Ltd. designs, produces, and sells valve actuators, screw jacks, gear drives, and gears in Japan and internationally. The company offers valve actuators for a range of applications in petroleum, nuclear, generating plants, and water/sewer pipelines; jacks for use in lifting/lowering, inclines, pulling, opening/closing, adjustment, and holding; gear drives for power plant, chemical plant, waste water treatment plant, and other applications; and gears for automotive, railroad, industrial machine, and other industries. It also provides equipment for communication, control, and detection, including control equipment and control systems, sensor control, and condition monitoring systems. In addition, the company constructs and installs machine instruments; and designs, supervises, operates, and installs electric works. Nippon Gear Co., Ltd. was founded in 1938 and is headquartered in Fujisawa, Japan.

How the Company Makes Money

Nippon Gear Co., Ltd. generates revenue through the production and sale of its core products, which include precision gears and mechanical components used in various applications, such as industrial machinery and automotive systems. The company operates on a business-to-business (B2B) model, supplying their products to manufacturers and industries that require high-quality mechanical solutions. Key revenue streams include direct sales of gear products, custom manufacturing services, and long-term contracts with major industrial clients. Additionally, Nippon Gear may benefit from strategic partnerships with other manufacturers and technology firms, which can enhance its market reach and drive additional sales through collaborative projects or joint ventures. The company also focuses on research and development to innovate and improve its product offerings, which in turn helps maintain competitiveness and customer loyalty.

Nippon Gear Co., Ltd. Financial Statement Overview

Summary

Strong income statement performance (revenue growth, improving margins, robust EBIT/EBITDA) and solid cash generation with strong free cash flow trends. Balance sheet leverage is conservative with a high equity ratio, though return on equity is noted as an area to improve.

Income Statement

Nippon Gear Co., Ltd. has shown a strong revenue growth trend over the years, marking a significant increase from 2023 to 2024. The company maintains a healthy gross profit margin, and its net profit margin has improved, reflecting effective cost control and operational efficiency. EBIT and EBITDA margins are robust, suggesting strong operating performance.

Balance Sheet

The balance sheet is strong, with a low debt-to-equity ratio indicating conservative leverage. The equity ratio is high, demonstrating stability with significant stockholders' equity relative to total assets. However, the company's return on equity could be more robust, pointing to potential areas for enhancing shareholder returns.

Cash Flow

Cash flow analysis shows a positive trend, with strong operating cash flow relative to net income, indicating good cash generation capabilities. The free cash flow growth rate is impressive, signaling effective management of capital expenditures and operational efficiency. The company’s ability to convert earnings into free cash flow is commendable.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	9.20B	9.56B	9.62B	7.52B	7.57B	7.72B
Gross Profit	4.23B	4.27B	4.43B	3.14B	2.27B	2.23B
EBITDA	2.10B	2.52B	2.37B	1.20B	683.82M	707.07M
Net Income	1.31B	1.55B	1.54B	685.13M	295.83M	312.53M
Balance Sheet
Total Assets	14.10B	15.23B	14.68B	12.72B	11.37B	11.34B
Cash, Cash Equivalents and Short-Term Investments	4.64B	4.80B	4.48B	4.30B	3.53B	2.95B
Total Debt	402.97M	109.80M	366.46M	511.92M	658.37M	726.48M
Total Liabilities	3.52B	2.67B	3.58B	3.28B	2.57B	2.79B
Stockholders Equity	10.58B	12.56B	11.10B	9.44B	8.79B	8.55B
Cash Flow
Free Cash Flow	370.63M	795.46M	421.68M	977.46M	706.17M	590.73M
Operating Cash Flow	370.63M	1.29B	748.94M	1.27B	803.87M	721.47M
Investing Cash Flow	0.00	-884.92M	-331.61M	-297.71M	-100.26M	-169.18M
Financing Cash Flow	0.00	-384.31M	-245.05M	-201.18M	-125.11M	-274.49M

Nippon Gear Co., Ltd. Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 853.00
• 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:6356, the sentiment is Neutral. The current price of 853 is below the 20-day moving average (MA) of 921.95, below the 50-day MA of 886.24, and above the 200-day MA of 694.76, indicating a neutral trend. The MACD of -6.23 indicates Positive momentum. The RSI at 43.82 is Neutral, neither overbought nor oversold. The STOCH value of 21.74 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for JP:6356.

Nippon Gear Co., Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
7235	78 Outperform	¥15.16B	7.99	―	4.02%	2.31%	10.68%
6356	76 Outperform	¥11.85B	7.93	―	0.92%	-1.79%	-8.54%
7264	70 Outperform	¥8.60B	41.92	―	3.54%	-0.72%	-72.70%
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%
7291	60 Neutral	¥8.57B	22.61	―	4.24%	-7.88%	-73.98%
7297	57 Neutral	¥6.21B	-10.55	―	3.44%	-7.72%	-311.30%
7277	56 Neutral	¥11.85B	34.51	―	2.23%	-4.06%	―