Is Olympic Group (TSE:8289) Weighed On By Its Debt Load?

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.' 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. We can see that Olympic Group Corporation (TSE:8289) does use debt in its business. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Olympic Group Carry?

As you can see below, Olympic Group had JP¥29.4b of debt, at August 2025, which is about the same as the year before. You can click the chart for greater detail. However, it also had JP¥6.13b in cash, and so its net debt is JP¥23.2b.

How Strong Is Olympic Group's Balance Sheet?

According to the last reported balance sheet, Olympic Group had liabilities of JP¥30.4b due within 12 months, and liabilities of JP¥15.8b due beyond 12 months. On the other hand, it had cash of JP¥6.13b and JP¥2.32b worth of receivables due within a year. So it has liabilities totalling JP¥37.8b more than its cash and near-term receivables, combined.

The deficiency here weighs heavily on the JP¥10.5b company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we definitely think shareholders need to watch this one closely. At the end of the day, Olympic Group would probably need a major re-capitalization if its creditors were to demand repayment. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Olympic Group will need earnings to service that debt. 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.

See our latest analysis for Olympic Group

In the last year Olympic Group wasn't profitable at an EBIT level, but managed to grow its revenue by 3.1%, to JP¥98b. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Importantly, Olympic Group had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable JP¥1.2b at the EBIT level. Combining this information with the significant liabilities we already touched on makes us very hesitant about this stock, to say the least. That said, it is possible that the company will turn its fortunes around. Nevertheless, we would not bet on it given that it lost JP¥1.8b in just last twelve months, and it doesn't have much by way of liquid assets. So while it's not wise to assume the company will fail, we do think it's 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. Be aware that Olympic Group is showing 4 warning signs in our investment analysis , and 2 of those can't be ignored...

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.