Does SpacemarketInc (TSE:4487) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. We note that Spacemarket,Inc. (TSE:4487) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

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. 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. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is SpacemarketInc's Debt?

As you can see below, at the end of September 2025, SpacemarketInc had JP¥790.0m of debt, up from JP¥233.0m a year ago. Click the image for more detail. However, it does have JP¥1.16b in cash offsetting this, leading to net cash of JP¥368.0m.

How Strong Is SpacemarketInc's Balance Sheet?

According to the last reported balance sheet, SpacemarketInc had liabilities of JP¥1.52b due within 12 months, and liabilities of JP¥763.0m due beyond 12 months. On the other hand, it had cash of JP¥1.16b and JP¥1.06b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by JP¥63.0m.

This state of affairs indicates that SpacemarketInc's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the JP¥3.54b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, SpacemarketInc boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for SpacemarketInc

On top of that, SpacemarketInc grew its EBIT by 30% 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 SpacemarketInc's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While SpacemarketInc has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Happily for any shareholders, SpacemarketInc actually produced more free cash flow than EBIT over the last three years. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

We could understand if investors are concerned about SpacemarketInc's liabilities, but we can be reassured by the fact it has has net cash of JP¥368.0m. And it impressed us with free cash flow of JP¥73m, being 110% of its EBIT. So is SpacemarketInc's debt a risk? It doesn't seem so to us. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 1 warning sign for SpacemarketInc that 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.