Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies Sun A.Kaken Company,Limited (TSE:4234) makes use of debt. But is this debt a concern to shareholders?
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 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. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.
What Is Sun A.Kaken CompanyLimited's Debt?
As you can see below, at the end of June 2025, Sun A.Kaken CompanyLimited had JP¥4.88b of debt, up from JP¥3.96b a year ago. Click the image for more detail. However, its balance sheet shows it holds JP¥5.71b in cash, so it actually has JP¥822.0m net cash.
How Healthy Is Sun A.Kaken CompanyLimited's Balance Sheet?
According to the last reported balance sheet, Sun A.Kaken CompanyLimited had liabilities of JP¥13.1b due within 12 months, and liabilities of JP¥3.45b due beyond 12 months. On the other hand, it had cash of JP¥5.71b and JP¥11.5b worth of receivables due within a year. So it can boast JP¥643.0m more liquid assets than total liabilities.
This surplus suggests that Sun A.Kaken CompanyLimited has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Sun A.Kaken CompanyLimited boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Sun A.Kaken CompanyLimited 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 Sun A.Kaken CompanyLimited
In the last year Sun A.Kaken CompanyLimited wasn't profitable at an EBIT level, but managed to grow its revenue by 7.7%, to JP¥30b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.
So How Risky Is Sun A.Kaken CompanyLimited?
Although Sun A.Kaken CompanyLimited had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of JP¥279m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. 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. Be aware that Sun A.Kaken CompanyLimited is showing 3 warning signs in our investment analysis , you should know about...
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.
Valuation is complex, but we're here to simplify it.
Discover if Sun A.Kaken CompanyLimited might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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