Watami Co., Ltd. (7522) AI Stock Analysis

• Market Cap: ¥37.91B
• Dividend Yield: 1.04%
• Average Volume (3M): 79.94K
• Price to Earnings (P/E): 4.0
• Beta (1Y): 0.44
• Revenue Growth: 5.47%
• EPS Growth: 61.89%
• Country: JP
• Employees: 1,621
• Sector: Consumer Cyclical
• Sector Strength: 84
• Industry: Restaurants
• EPS (TTM): 57.95
• Shares Outstanding: 42,684,880
• 10 Day Avg. Volume: 62,400
• 30 Day Avg. Volume: 79,936
• PEG Ratio: -0.66
• Price to Book (P/B): 1.56
• Price to Sales (P/S): 0.47
• P/FCF Ratio: 7.58
• 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: 65 Neutral
• Price Target: ¥1,043.00 ▲(13.37% Upside)
• Action: Reiterated Date: 02/19/26
• Date: Action: Reiterated 02/19/26

The score is driven primarily by improving financial performance (return to profitability, better leverage, positive cash flow), tempered by still-thin margins and a recent decline in free cash flow. Technicals are only moderately supportive (above shorter-term averages but below the 200-day), while valuation is relatively reasonable due to the low P/E but with a modest dividend yield.

Positive Factors

Profitability recovery

Watami has moved from loss-making to sustained profitability, with positive EBIT and net margins and modest revenue growth. This recovery boosts operational resilience, supports reinvestment in stores and brands, and establishes a firmer earnings base for multi-quarter cash generation and planning.

Improving balance sheet and ROE

Debt levels have meaningfully declined from peak, equity is rebuilding and ROE is healthy. Lower leverage improves financial flexibility for capex or restructuring, reduces solvency risk in downturns, and signals management progress in restoring capital efficiency over coming quarters.

Positive cash generation

The company now generates positive operating and free cash flow after prior years of deficits. Consistent cash generation enables debt paydown, franchise or store investment, and supports shareholder returns where appropriate, making the business less reliant on external financing.

Negative Factors

Thin and pressured margins

Despite recovery, margins remain narrow and have slipped from prior-year peaks. Thin margins limit the buffer against input cost inflation or volume shocks, constrain reinvestment capacity, and mean earnings are sensitive to small changes in traffic or commodity/labor costs over the medium term.

Residual leverage sensitivity

With debt-to-equity near ~1.0 the company retains a material leverage footprint. That level raises vulnerability to downturns or profit margin compression, could force conservative cash management or curb growth initiatives, and increases refinancing and interest-rate exposure risk.

Volatile free cash flow and weak conversion

A sharp FCF decline and sub‑1x cash conversion indicate cash realization volatility from working capital or capex timing. This undermines predictability of funding for expansion or debt reduction and raises the chance of short-term liquidity pressure if earnings dip or capex spikes.

Watami Co., Ltd. Business Overview & Revenue Model

Company Description

Watami Co., Ltd. engages in the food, home food, and agriculture services business in Japan and internationally. The company operates restaurants. It also engages in organic farming, livestock, and dairy businesses; and development, construction, operation, and management of wind power generation facilities. The company was incorporated in 1967 and is headquartered in Tokyo, Japan.

How the Company Makes Money

Watami Co., Ltd. generates revenue primarily through its restaurant operations, which include a wide range of izakaya and other dining establishments across Japan. The company capitalizes on the growing demand for dining out and socializing, attracting customers with its unique offerings and ambiance. In addition to in-restaurant sales, Watami also earns income from catering services and food product sales, including packaged goods that are marketed for home consumption. The company may also benefit from strategic partnerships with suppliers and distributors, enhancing its supply chain efficiency and product offerings. Seasonal promotions and loyalty programs further contribute to customer retention and increased sales, helping to solidify Watami's position in the competitive food service industry.

Watami Co., Ltd. Financial Statement Overview

Summary

Solid turnaround with positive operating and net margins (EBIT ~4.3%, net ~4.2%) and modest revenue growth (~2.1%). Balance sheet is improving (debt-to-equity near ~1.0; ROE ~14.7%), but leverage remains meaningful. Cash flow is positive (FCF ~¥4.0B) yet less consistent with a sharp TTM FCF decline (~-22%) and weaker cash conversion (~0.73x net income).

Income Statement

TTM (Trailing-Twelve-Months) results show a solid recovery profile: revenue is up ~2.1% with healthy gross profit (~56%) and positive operating profitability (EBIT margin ~4.3%). Net margin (~4.2%) is meaningfully improved versus the loss-making period in FY2021–FY2022, but profitability is still relatively thin for the industry and down from FY2024’s stronger net margin (~5.1%). Overall, the trend is favorable with improved earnings power, but margins remain a key watch item.

Balance Sheet

Leverage has improved materially versus FY2021 (when debt-to-equity was extremely high), and the latest TTM (Trailing-Twelve-Months) debt-to-equity is near ~1.0 with equity rebuilding. Returns on equity are healthy (TTM ~14.7%), signaling improved capital efficiency. The main constraint is that leverage is still meaningful for a restaurant operator, leaving sensitivity to demand softness and cost inflation, even though the direction of travel is clearly better.

Cash Flow

Cash generation is positive, with TTM (Trailing-Twelve-Months) operating cash flow (~¥6.5B) and free cash flow (~¥4.0B). However, free cash flow declined sharply (TTM growth ~-22%), and cash conversion is not especially strong (free cash flow is ~0.73x net income), suggesting working-capital/capex or volatility in cash realization. The company is far healthier than FY2021–FY2022 (negative cash flow), but consistency has not fully stabilized.

Breakdown	TTM	Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Income Statement
Total Revenue	91.94B	88.71B	82.30B	77.92B	64.36B	60.85B
Gross Profit	51.30B	48.36B	46.63B	42.18B	32.96B	29.58B
EBITDA	7.22B	7.03B	5.55B	3.29B	-1.37B	-7.29B
Net Income	3.70B	3.52B	4.19B	1.67B	-1.84B	-11.56B
Balance Sheet
Total Assets	70.47B	71.49B	64.23B	57.05B	52.22B	44.89B
Cash, Cash Equivalents and Short-Term Investments	38.78B	46.13B	40.64B	35.71B	30.83B	20.40B
Total Debt	23.78B	29.08B	26.76B	24.68B	25.02B	26.60B
Total Liabilities	41.11B	44.35B	42.06B	39.24B	37.59B	41.49B
Stockholders Equity	29.02B	26.80B	21.89B	17.68B	14.47B	3.24B
Cash Flow
Free Cash Flow	3.95B	5.52B	2.80B	5.10B	-692.00M	-6.85B
Operating Cash Flow	6.50B	6.89B	4.74B	6.68B	1.02B	-4.32B
Investing Cash Flow	-3.40B	-6.56B	-3.06B	-4.99B	-15.37B	-3.41B
Financing Cash Flow	-1.06B	-13.00M	59.00M	-1.54B	10.10B	11.64B

Watami Co., Ltd. Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 920.00
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:7522, the sentiment is Negative. The current price of 920 is below the 20-day moving average (MA) of 956.00, below the 50-day MA of 958.40, and below the 200-day MA of 974.17, indicating a bearish trend. The MACD of -6.87 indicates Positive momentum. The RSI at 40.81 is Neutral, neither overbought nor oversold. The STOCH value of 25.95 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for JP:7522.

Watami Co., Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
3087	70 Outperform	¥129.11B	14.74	―	2.09%	5.78%	10.26%
9936	66 Neutral	¥187.09B	27.13	―	1.65%	9.59%	8.08%
7522	65 Neutral	¥37.91B	3.96	―	1.04%	5.47%	61.89%
3197	63 Neutral	$760.31B	45.71	9.53%	0.55%	15.58%	60.90%
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%
3397	53 Neutral	¥380.11B	34.66	―	0.24%	9.19%	43.90%
9861	53 Neutral	¥206.68B	72.52	―	0.69%	10.75%	-14.28%

Watami Co., Ltd. Corporate Events

Watami Posts Higher Nine-Month Profit and Confirms Modest Full-Year Outlook

Watami reported consolidated net sales of ¥69.3 billion for the nine months to December 31, 2025, up 4.9% year on year, with operating profit rising 4.9% to ¥4.2 billion and profit attributable to owners of parent increasing 4.1% to ¥4.2 billion. The company’s equity ratio improved to 41.2% as net assets expanded, while basic earnings per share climbed to ¥94.80, underscoring a stronger balance sheet despite a decline in comprehensive income.

The company maintained its full-year forecast for the fiscal year ending March 31, 2026, projecting modest growth in sales and profits, including a 13.6% rise in full-year profit attributable to owners of parent to ¥4.0 billion. Watami confirmed a planned annual dividend of ¥10 per common share and stable payouts on preferred shares, while also expanding its consolidation scope with two new U.S. entities, signaling a continued push into overseas markets and potential long-term growth drivers for stakeholders.

The most recent analyst rating on (JP:7522) stock is a Buy with a Yen1083.00 price target. To see the full list of analyst forecasts on Watami Co., Ltd. stock, see the JP:7522 Stock Forecast page.