Is Kinden (TSE:1944) A Risky Investment?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly, Kinden Corporation (TSE:1944) does carry debt. But should shareholders be worried about its use of debt?

Our free stock report includes 1 warning sign investors should be aware of before investing in Kinden. Read for free now.

Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Kinden Carry?

The chart below, which you can click on for greater detail, shows that Kinden had JP¥14.9b in debt in March 2025; about the same as the year before. But on the other hand it also has JP¥196.2b in cash, leading to a JP¥181.2b net cash position.

A Look At Kinden's Liabilities

Zooming in on the latest balance sheet data, we can see that Kinden had liabilities of JP¥202.5b due within 12 months and liabilities of JP¥19.5b due beyond that. Offsetting these obligations, it had cash of JP¥196.2b as well as receivables valued at JP¥253.2b due within 12 months. So it can boast JP¥227.4b more liquid assets than total liabilities.

It's good to see that Kinden has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, Kinden boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Kinden

On top of that, Kinden grew its EBIT by 43% over the last twelve months, and that growth will make it easier to handle its debt. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Kinden's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Kinden may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last three years, Kinden reported free cash flow worth 17% of its EBIT, which is really quite low. That limp level of cash conversion undermines its ability to manage and pay down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Kinden has net cash of JP¥181.2b, as well as more liquid assets than liabilities. And it impressed us with its EBIT growth of 43% over the last year. So we don't think Kinden's use of debt is risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Kinden you should know about.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.