Is Yamato International (TSE:8127) Using Debt Sensibly?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Yamato International Inc. (TSE:8127) does carry debt. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. If things get really bad, the lenders can take control of the business. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Yamato International's Net Debt?

The image below, which you can click on for greater detail, shows that at August 2025 Yamato International had debt of JP¥815.0m, up from JP¥778.0m in one year. But it also has JP¥6.38b in cash to offset that, meaning it has JP¥5.56b net cash.

How Strong Is Yamato International's Balance Sheet?

We can see from the most recent balance sheet that Yamato International had liabilities of JP¥4.56b falling due within a year, and liabilities of JP¥1.43b due beyond that. Offsetting these obligations, it had cash of JP¥6.38b as well as receivables valued at JP¥1.19b due within 12 months. So it actually has JP¥1.58b more liquid assets than total liabilities.

This excess liquidity suggests that Yamato International is taking a careful approach to debt. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Simply put, the fact that Yamato International has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is Yamato International'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.

Check out our latest analysis for Yamato International

In the last year Yamato International had a loss before interest and tax, and actually shrunk its revenue by 8.0%, to JP¥19b. We would much prefer see growth.

So How Risky Is Yamato International?

While Yamato International lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of JP¥143m. So when you consider it has net cash, along with the statutory profit, the stock probably isn't as risky as it might seem, at least in the short term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 5 warning signs for Yamato International (of which 1 doesn't sit too well with us!) you should know about.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.