FRONTEO, Inc. (2158) AI Stock Analysis

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FRONTEO, Inc.

(TSE/TYO:2158)

Select Model

Rating:50Neutral

Price Target:JPY 715.00▲(10.85% Upside)

Action:reiterated

Date:08/19/26

The score is held back primarily by weakened 2026 cash generation versus net income and higher balance-sheet leverage, which add risk despite the earnings recovery. Technical signals are modestly supportive in the near term but do not confirm a longer-term uptrend. Valuation is a headwind given the high P/E and no provided dividend yield.

Positive Factors

Revenue and Profit RecoveryThe return to positive operating profit and net income, combined with 26% revenue growth in 2026, indicates meaningful recovery in the core business. If this momentum persists, it can rebuild earnings capacity, support reinvestment in AI offerings, and strengthen the company’s position over the next several quarters.

Negative Factors

Weak Cash ConversionCash generation materially lagged reported earnings in 2026, reducing the amount of internally generated funding available for product development, debt service, and expansion. Unless conversion improves, the gap between accounting profit and cash may constrain financial flexibility and make future growth more dependent on external funding.

FRONTEO, Inc. (2158) vs. iShares MSCI Japan ETF (EWJ)

Market Cap: JPY 24.88B
Dividend Yield: ―
Average Volume (3M): 283.33K
Price to Earnings (P/E): 41.1
Beta (1Y): 1.58
Revenue Growth: 27.44%
EPS Growth: 131.69%
Country: Japan
Employees: 272
Sector: Technology
Sector Strength: 61
Industry: Information Technology Services

FRONTEO, Inc. Business Overview & Revenue Model

Company Description

FRONTEO, Inc. specializes in eDiscovery and related services, particularly for Asian languages, serving clients across Japan, the United States, Korea, and internationally. The company operates through two primary divisions: its LegalTech AI Business...

How the Company Makes Money

FRONTEO primarily generates revenue by providing technology-enabled services and software related to legal and compliance data analysis. Key revenue streams include (1) fees for e-discovery and litigation support services, where the company assists l...

FRONTEO, Inc. Financial Statement Overview

Summary

Income statement shows a meaningful recovery with strong 2026 revenue growth (+26%) and a return to positive operating profit and net income, but earnings have been volatile versus prior peaks. Balance sheet risk has risen as leverage increased to roughly debt-to-equity ~1.05. Cash flow is the main weakness: 2026 operating cash flow (~¥0.32B) and free cash flow (~¥0.12B) fell well below net income (~¥0.54B), indicating weak cash conversion and reduced flexibility.

Income Statement

63Positive

Balance Sheet

54Neutral

Cash Flow

41Neutral

Financial statement breakdown
Breakdown	TTM	Mar 2026	Mar 2025	Mar 2024	Mar 2023	Mar 2022
Income Statement
Total Revenue	7.73B	7.64B	6.10B	7.38B	7.22B	10.93B
Gross Profit	3.73B	3.91B	3.45B	3.73B	3.26B	5.57B
EBITDA	1.17B	1.17B	614.80M	-1.93B	-728.90M	2.69B
Net Income	607.12M	544.24M	555.09M	-2.84B	-1.70B	1.31B
Balance Sheet
Total Assets	8.83B	9.20B	6.82B	7.63B	9.60B	12.37B
Cash, Cash Equivalents and Short-Term Investments	1.45B	1.73B	2.60B	3.04B	1.48B	3.46B
Total Debt	3.90B	4.02B	1.99B	2.93B	3.09B	3.75B
Total Liabilities	5.08B	5.36B	3.60B	4.79B	4.55B	5.93B
Stockholders Equity	3.75B	3.84B	3.23B	2.84B	5.05B	6.44B
Cash Flow
Free Cash Flow	0	117.94M	668.34M	1.23B	-1.54B	1.72B
Operating Cash Flow	0	319.07M	751.47M	1.71B	-914.62M	2.38B
Investing Cash Flow	0	-2.55B	-254.03M	-181.86M	-625.06M	-618.21M
Financing Cash Flow	0	1.34B	-911.48M	-32.15M	-606.32M	-1.46B

FRONTEO, Inc. Technical Analysis

Technical Analysis SentimentNegative

Last Price645.00

Price Trends

50DMA668.08Negative

100DMA646.34Negative

200DMA717.95Negative

Market Momentum

MACD-9.14Positive

RSI42.01Neutral

STOCH20.73Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:2158, the sentiment is Negative. The current price of 645.00 is below the 20-day moving average (MA) of 696.75, below the 50-day MA of 668.08, and below the 200-day MA of 717.95, indicating a bearish trend. The MACD of -9.14 indicates Positive momentum. The RSI at 42.01 is Neutral, neither overbought nor oversold. The STOCH value of 20.73 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for JP:2158.

FRONTEO, Inc. Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

JP:2158 against its peers
Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
JP:3916	86Outperform	JPY 31.64B	14.24	―	3.69%	5.74%	-3.58%
JP:4725	79Outperform	JPY 32.92B	9.18	10.39%	5.15%	3.46%	6.90%
JP:3984	76Outperform	JPY 21.71B	12.88	―	1.78%	15.59%	6.88%
Sector *	61Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
JP:5574	60Neutral	JPY 20.20B	18.61	―	―	27.68%	126.99%
JP:2158	50Neutral	JPY 25.54B	41.13	―	―	27.44%	131.69%

* Technology Sector Average

Performance Comparison

JP:2158 and its peers over the selected period
Ticker	Company Name	Price	Change	% Change
JP:2158	FRONTEO, Inc.	645.00	-277.00	-30.04%
JP:4725	CAC Holdings Corporation	1940.00	-45.28	-2.28%
JP:3916	Digital Information Technologies Corp.	1017.00	-199.35	-16.39%
JP:3984	User Local, Inc.	1348.00	-611.23	-31.20%
JP:5574	ABEJA,Inc.	2041.00	-758.00	-27.08%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.

Date of analysis: Aug 19, 2026

FRONTEO, Inc. AI Stock Analysis