[Stock Analysis] Software Service (TYO: 3733)

With a criminally misleading name, Software Service Inc is one of Japan's largest and most profitable entities in the healthcare IT services and consulting sector

Please note: This article is for informational purposes only and is not intended as investment advice. The mention of specific stocks is not a recommendation to buy or sell any securities

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• Ticker: TYO: 3733

• Price at publication: ¥13,500

First off, hats off to X user Turtleneck for shining a light on Software Service (3733). This intriguing stock popped up on my value screener more times than I can count, thanks to its stellar growth trajectory over the years. But boy, trying to get a handle on what they do from their website is like reading hieroglyphics—especially ironic for a tech company.

You’d be forgiven for thinking the company’s website was from the 90s

Perhaps even more of a crime is their name, "Software Service", when their main markets are hardware and maintenance services to the healthcare sector!

Executive Summary

• Beyond the Name: Despite "Software Service," the company excels in hardware and maintenance for the healthcare sector, particularly in EMRs (Electronic Medical Records) for hospitals.

• The Real Deal: Hiding behind a dated website is a leader in healthcare IT, focusing on critical digital records and order-entry systems.

• Valuation Highlights: Sporting a P/E ratio of just 13.8x—far below the sector's 25.8x—Software Service's financials hint at a potentially underrated stock.

• Financial Snapshot: For Q4 2023, a remarkable growth in net earnings by 27% and revenue up by 18%, alongside gross and EBITDA margin improvements to 27.21% and 20.85%, respectively, showcase operational prowess.

• Market Position: With a niche in the competitive healthcare IT market, Software Service boasts a unique in-house development strategy, setting it apart from giants like Fujitsu.

• Strategic Challenges: Expanding to smaller hospitals presents both opportunities and hurdles, with the company's financial health indicating resilience in navigating these waters.

• Ownership and Stability: Founder Masaru Miyazaki's 24.87% stake and strong institutional backing signal confidence and a commitment to long-term growth.

• Financial Robustness: A doubled cash position from 2019 to 2023 and a healthy cash flow highlight Software Service's solid financial foundation and operational efficiency.

For investors seeking a blend of value, growth potential, and stability in the tech-healthcare intersection, Software Service (3733) presents an intriguing case. With operational efficiencies, strategic market positioning, and a solid ownership structure, this under-the-radar company may just be the opportunity value investors are searching for. Dive deeper to uncover the full scope of Software Service's potential and any hidden skeletons in the closet in my full analysis.