Circlace Inc

Circlace Inc maintains a strong liquidity position, with cash and equivalents amounting to ¥807.96 million, representing 52.3% of total assets. The company's liquidity FPT (free cash flow to total liabilities) is robust, supported by a current ratio of 2.06 and a debt-to-equity ratio of 0.29, indicating a conservative capital structure. The price-to-book ratio of 4.14 suggests the market values the company at a premium to its book value, while the price-to-tangible-book ratio is identical, indicating no significant intangible assets.

Profitability metrics show a return on equity (ROE) of 9.68% and a return on assets (ROA) of 4.93%, both below the industry median for IT Services & Consulting firms. The net income of ¥76.11 million is supported by a gross profit margin of 50.3%, but operating income of ¥4.90 million indicates a narrow operating margin of 0.59%, which is a concern for long-term sustainability.

The company's revenue is concentrated in a single business segment, IT Services, with no disclosed geographic diversification. This lack of diversification increases exposure to regional economic fluctuations and client concentration risk. The company's revenue of ¥836.80 million is derived from a single business model, with no material revenue from product sales or recurring subscription models.

Growth trajectory is modest, with no disclosed revenue growth in the most recent fiscal year. The company's price-to-earnings ratio of 42.79 and EV/EBITDA of 546.19 suggest a high valuation relative to earnings, which may not be supported by strong revenue growth or margin expansion. The capital expenditure of -¥12.16 million indicates a reduction in investment, which could signal a focus on cost control rather than expansion.

Risk factors include low liquidity and dilution risk, with no immediate filing-based flags detected. The company's low debt-to-equity ratio and strong cash position mitigate credit risk, but the narrow operating margin and lack of geographic diversification pose operational risks. No dilution sources were identified in recent filings, and the company's shares outstanding have not changed in the last 12 months.

Recent events include the release of the latest financial results, which showed a revenue of ¥836.80 million and a net income of ¥76.11 million. Analysts reported a last actual EPS of ¥42.60 and a revenue of ¥3.80 billion, suggesting a significant discrepancy between reported and analyst-estimated figures. No material events or regulatory actions were disclosed in the most recent filings.

Circlace generated 184 million JPY net income in FY2025, marking a significant turnaround from the 39 million JPY loss in FY2024.

Free cash flow improved to 127 million JPY in FY2025, reversing the 65 million JPY outflow recorded in the prior fiscal year.

Revenue grew 11.5% year-over-year to 3.8 billion JPY in FY2025, demonstrating top-line expansion momentum.

Operating margin of 0.6% remains well below the 5.1% cohort median, suggesting weak core operational profitability relative to peers.

Return on invested capital is merely 0.5%, indicating minimal value creation above the cost of capital for shareholders.

The debt-to-equity ratio of 0.29 is higher than the cohort median of 0.12, implying greater financial leverage risk.

Net income volatility is evident, swinging from a 176 million JPY profit in FY-3 to a 39 million JPY loss in FY-1.

Revenue ¥1.11B, +10,3% YoY; Operating income −93,5% YoY.

• ▍Revenue ¥1.11B, +10,3% YoY
• ▍Operating income −93,5% YoY
• ▍Net income −118,0% YoY
• ▍Net margin -1.0%

Revenue ¥1.09B, +22,9% YoY; Operating income +198,5% YoY.

• ▍Revenue ¥1.09B, +22,9% YoY
• ▍Operating income +198,5% YoY
• ▍Net income +61,0% YoY
• ▍Net margin 4.4%

Revenue ¥1.00B, +23,9% YoY; Operating income −17,3% YoY.

• ▍Revenue ¥1.00B, +23,9% YoY
• ▍Operating income −17,3% YoY
• ▍Net income −73,4% YoY
• ▍Net margin -3.3%

Revenue ¥1.10B, +31,8% YoY; Operating income +2 053,7% YoY.

• ▍Revenue ¥1.10B, +31,8% YoY
• ▍Operating income +2 053,7% YoY
• ▍Net income +49,5% YoY
• ▍Net margin 10.3%

Revenue ¥1.00B; Operating income ¥80.3M.

• ▍Revenue ¥1.00B
• ▍Operating income ¥80.3M
• ▍Net margin 5.9%

Revenue ¥889.7M; Operating income ¥23.6M.

• ▍Revenue ¥889.7M
• ▍Operating income ¥23.6M
• ▍Net margin 3.4%

Revenue ¥807.5M; Operating income -¥50.7M.

• ▍Revenue ¥807.5M
• ▍Operating income -¥50.7M
• ▍Net margin -2.4%

Revenue ¥836.8M; Operating income ¥4.9M.

• ▍Revenue ¥836.8M
• ▍Operating income ¥4.9M
• ▍Net margin 9.1%

Revenue ¥3.80B, +31,1% YoY; Operating income +286,8% YoY.

• ▍Revenue ¥3.80B, +31,1% YoY
• ▍Operating income +286,8% YoY
• ▍Net income +569,9% YoY
• ▍Free cash flow +295,2% YoY
• ▍Net margin 4.8%

Revenue ¥2.90B, +14,8% YoY; Operating income −236,0% YoY.

• ▍Revenue ¥2.90B, +14,8% YoY
• ▍Operating income −236,0% YoY
• ▍Net income −455,1% YoY
• ▍Free cash flow −24,3% YoY
• ▍Net margin -1.4%