Is JELLY BEANS GROUP (TSE:3070) Using Debt In A Risky Way?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that JELLY BEANS GROUP Co., Ltd. (TSE:3070) does use debt in its business. But should shareholders be worried about its use of debt?

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does JELLY BEANS GROUP Carry?

The image below, which you can click on for greater detail, shows that at April 2025 JELLY BEANS GROUP had debt of JP¥269.0m, up from JP¥206.0m in one year. However, its balance sheet shows it holds JP¥300.0m in cash, so it actually has JP¥31.0m net cash.

A Look At JELLY BEANS GROUP's Liabilities

We can see from the most recent balance sheet that JELLY BEANS GROUP had liabilities of JP¥288.0m falling due within a year, and liabilities of JP¥246.0m due beyond that. On the other hand, it had cash of JP¥300.0m and JP¥197.0m worth of receivables due within a year. So it has liabilities totalling JP¥37.0m more than its cash and near-term receivables, combined.

This state of affairs indicates that JELLY BEANS GROUP's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the JP¥7.52b company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, JELLY BEANS GROUP also has more cash than debt, so we're pretty confident it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since JELLY BEANS GROUP will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for JELLY BEANS GROUP

Over 12 months, JELLY BEANS GROUP made a loss at the EBIT level, and saw its revenue drop to JP¥819m, which is a fall of 9.6%. We would much prefer see growth.

So How Risky Is JELLY BEANS GROUP?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that JELLY BEANS GROUP had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through JP¥636m of cash and made a loss of JP¥539m. With only JP¥31.0m on the balance sheet, it would appear that its going to need to raise capital again soon. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 4 warning signs with JELLY BEANS GROUP (at least 3 which are a bit concerning) , and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.