Cresco And 2 More Japanese AI Stocks To Watch

Global bond yields have climbed to levels last seen before the global financial crisis, and Japan’s 10 year government bond yield recently touched its highest point since 1996. Higher funding costs can punish richly priced growth stories. Yet they also leave some Japan AI leaders overlooked. This article highlights three Japanese artificial intelligence stocks from our undervaluation screen that could merit a closer look now.

The three stocks below are just a starting sample from our undervalued Japan AI list. The full screen surfaced 12 more companies with equally compelling narratives that are not covered here. To identify and analyze your own highest conviction AI opportunities, head straight to the Undervalued Artificial Intelligence/ AI Stocks screener.

Cresco (TSE:4674)

Cresco is a Tokyo based IT services group that builds and maintains enterprise and embedded systems. Its Digital Solution Business provides AI systems development, data analytics and cloud based AI services linked to the ChatGPT trend. It generated ¥66.3 billion of revenue in Japan and has a market cap of about ¥73.6 billion.

Cresco plugs directly into the AI and ChatGPT build out through its AI systems, data platforms, cloud deployments, robotics and RPA work for Japanese enterprises. Earnings grew 22.4% year on year and net margin sits at 8.1%. The stock trades about 28.1% below an estimated fair value, and the outlook depends on how a quiet shift in AI project economics develops.

As AI project returns rebalance, check the 2 key rewards and 1 important warning sign to see how Cresco’s valuation and risk profile could be shifting under the surface.

Systena (TSE:2317)

Systena is a Tokyo based IT services group that helps enterprises plan, build, and test digital systems. Its Digital Integration and IT & DX Service units are directly tied to AI and IoT projects, including RPA and business intelligence tools. It has a market cap of about ¥157.3b.

Systena is involved in the ChatGPT and AI buildout through its work on AI solution engineering, its Canbus.IoT platform, and AI driven automation projects that sit on top of cloud tools enterprises already use. Investors seeking AI related exposure can find both this AI angle and a dividend yield of about 4.14%, which places significant importance on how any shift in enterprise automation appetites develops.

As that balance between yield and automation appetite shifts, review the analysis report for Systena to see how Systena’s AI exposure and dividend profile could be decoupling.

WingArc1st (TSE:4432)

WingArc1st builds software that turns enterprise documents and data into usable information, led by its invoiceAgent AI OCR tool that reads invoices for automation and analytics. The Data Empowerment Business generated about ¥31.4 billion in Japan, and the group carries a market value of roughly ¥115.4 billion.

WingArc1st ties directly into the AI theme through invoiceAgent AI OCR, which automates invoice data capture and feeds Dr.Sum and MotionBoard analytics for finance and operations teams. A P/E around 17.5x against software peers, along with its revenue and earnings profile, puts attention on how the business could be affected if AI driven document workflows become the default rather than the exception.

If AI workflows really do become the default, go straight to the analysis report for WingArc1st to see what the market might be missing on WingArc1st.

Seeking Fresh Alternatives Beyond Japan AI?

Fresh ideas move first and the market follows. Some themes gain momentum quietly, then gain wider attention once the crowd catches on. Review these curated lists before the window narrows.

• Explore potential dividend opportunities by scanning companies in the 14 dividend fortresses before more income-focused investors enter the space.
• Monitor where AI-related revenue stories may be developing by filtering for 38 profitable AI stocks that aren't just burning cash while they may still be less widely followed.
• Review the curated 39 power grid technology and infrastructure stocks to understand companies involved in power infrastructure before interest in this area potentially increases.

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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