We Think SaizeriyaLtd (TSE:7581) Can Manage Its Debt With Ease

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. We can see that Saizeriya Co.,Ltd. (TSE:7581) does use debt in its business. But the more important question is: how much risk is that debt creating?

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

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. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does SaizeriyaLtd Carry?

As you can see below, SaizeriyaLtd had JP¥6.00b of debt, at May 2025, which is about the same as the year before. You can click the chart for greater detail. However, it does have JP¥67.8b in cash offsetting this, leading to net cash of JP¥61.8b.

How Healthy Is SaizeriyaLtd's Balance Sheet?

We can see from the most recent balance sheet that SaizeriyaLtd had liabilities of JP¥35.3b falling due within a year, and liabilities of JP¥26.4b due beyond that. Offsetting these obligations, it had cash of JP¥67.8b as well as receivables valued at JP¥6.01b due within 12 months. So it actually has JP¥12.1b more liquid assets than total liabilities.

This surplus suggests that SaizeriyaLtd has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, SaizeriyaLtd boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for SaizeriyaLtd

Also good is that SaizeriyaLtd grew its EBIT at 12% over the last year, further increasing its ability to manage debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine SaizeriyaLtd's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. SaizeriyaLtd 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, SaizeriyaLtd actually produced more free cash flow than EBIT. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that SaizeriyaLtd has net cash of JP¥61.8b, as well as more liquid assets than liabilities. The cherry on top was that in converted 122% of that EBIT to free cash flow, bringing in JP¥10b. So we don't think SaizeriyaLtd's use of debt is risky. Over time, share prices tend to follow earnings per share, so if you're interested in SaizeriyaLtd, you may well want to click here to check an interactive graph of its earnings per share history.

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.

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.