Is Nexyz. Group (TSE:4346) A Risky Investment?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, Nexyz. Group Corporation (TSE:4346) does carry debt. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Nexyz. Group's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Nexyz. Group had debt of JP¥7.74b, up from JP¥5.79b in one year. But on the other hand it also has JP¥8.11b in cash, leading to a JP¥372.0m net cash position.

A Look At Nexyz. Group's Liabilities

According to the last reported balance sheet, Nexyz. Group had liabilities of JP¥10.1b due within 12 months, and liabilities of JP¥5.29b due beyond 12 months. Offsetting this, it had JP¥8.11b in cash and JP¥5.19b in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by JP¥2.14b.

Since publicly traded Nexyz. Group shares are worth a total of JP¥11.4b, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, Nexyz. Group also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Nexyz. Group

Even more impressive was the fact that Nexyz. Group grew its EBIT by 180% over twelve months. That boost will make it even easier to pay down debt going forward. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Nexyz. Group's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Nexyz. Group 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, Nexyz. Group actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

Although Nexyz. Group's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of JP¥372.0m. The cherry on top was that in converted 113% of that EBIT to free cash flow, bringing in JP¥579m. So we don't think Nexyz. Group's use of debt is risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - Nexyz. Group has 3 warning signs we think you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.