3 Japanese Software Stocks With Rising Profit Margins to Watch

Markets are being pulled in many directions by inflation debates, energy prices, shifting export trends and interest rate expectations. In this kind of cross current, some investors look for more than just quarterly targets. They look for founder led companies where leaders have their own legacy and capital on the line. The Founder-Led Companies screener focuses on exactly that, and can help you focus on businesses where leadership is deeply invested in long term outcomes. In this article you will see three stocks from the screener that stand out today and why they may deserve a place on your watchlist.

Future (TSE:4722)

Overview: Future Corporation is a Tokyo based IT services group that helps businesses design and run their systems, combining IT consulting with package software, e-commerce, digital marketing and IT education.

Operations: Future generates the bulk of its revenue from IT Consulting & Services at ¥70,393 million, with Business Innovation contributing ¥8,258 million and smaller amounts from other segments, all currently reported from Japan at ¥78,670 million.

Market Cap: ¥217.0b

Future offers a mix of solid fundamentals and founder involvement that many investors look for. Earnings grew 22.7% over the past year and margins improved, with net profit margin at 15.6%. The stock trades slightly below one estimate of fair value and at a P/E below many peers, while still pricing in double digit earnings growth forecasts. At the same time, Future relies fully on external borrowing for funding, which lifts financial risk, and its return on equity is below the 20% level some investors target. Add in the proposed management buyout at ¥2,451 per share and there is a lot going on that is worth understanding in more detail.

Future’s earnings growth, improving margins and the proposed management buyout price raise important questions about what the market might be missing. Get the full story in the analysis report for Future

Rorze (TSE:6323)

Overview: Rorze Corporation is a Fukuyama based manufacturer of high precision robots and automation systems that move and handle wafers, masks and other components for semiconductor and flat panel display production lines worldwide, and it also supplies automation equipment for life science labs such as incubators and cell handling systems.

Market Cap: ¥691.8b

Rorze offers direct exposure to the picks and shovels of chip manufacturing, with robots and wafer handling systems that sit inside production tools across the semiconductor chain. Analysts expect solid earnings and revenue growth over the next few years. However, the stock has lagged the broader Japanese semiconductor industry and carries a rich P/E, which raises questions about whether near term volatility and a large ¥7.9b one off loss are masking the longer term picture. In addition, funding relies on external borrowing and board independence is limited, so governance and balance sheet quality may warrant closer inspection when considering where Rorze fits on a watchlist.

Rorze sits at the crossroads of chip automation and investor skepticism, with recent volatility and that ¥7.9b one off loss potentially masking the real story. Get the full context in the 2 key rewards and 2 important warning signs (1 is major!)

Sansan (TSE:4443)

Overview: Sansan is a Tokyo based cloud software company that helps businesses manage contacts, invoices, contracts and customer feedback through products like Sansan, Bill One, Contract One and AskOne, along with the Eight business card app and transcription services for corporate events and press conferences.

Operations: Sansan generates most of its revenue from the Sansan and Bill One business at ¥46,847 million, with ¥6,720 million from the Eight business and smaller contributions from other services, all currently reported from Japan at ¥53,761 million.

Market Cap: ¥249.3b

Sansan has turned its contact management roots into a broader workflow platform, with earnings growth that has been very large in the past year and a multi year earnings growth rate of 54.9% per year. Forecasts indicate expected earnings growth of about 25% a year and an expected return on equity of 32% in three years, while profit margins have widened to 12.6% and the company has started returning cash through buybacks and a first dividend. At the same time, the stock trades on a premium P/E and relies fully on external borrowing, which adds financial and share price risk. The mix of earnings quality, governance and funding structure presents Sansan as a detailed founder led story.

Sansan’s earnings and return on equity targets suggest a business that could be breaking out, while its premium P/E and full reliance on borrowing keep many investors cautious. See how the analyst forecasts for Sansan frames the upside and the one factor that could quietly change the script

The three founder led stocks in this article are just a starting point. The full Founder-Led Companies screener surfaces more than 100 other companies where leaders have their own capital and reputations tied to long term outcomes. Use Simply Wall St to identify and analyze the exact catalysts and narratives that matter to you so you can focus on the founder stories that best match your highest conviction ideas.

Take Control of Your Investment Journey

If Future or any of these companies have caught your attention, register for FREE with Simply Wall St and add your companies to a Watchlist to monitor the share price against the fair value and track any new developments as they happen. Once you've made your move, manage your holdings with our Portfolio Command Center that filters out the noise to deliver only the most critical, actionable updates. Throughout your journey, our Community allows you to filter the best ideas from thousands of investor perspectives. By uncovering hidden catalysts and risks early, you'll accelerate your decision-making and stay one step ahead of the market.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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