CyberAgent (TSE:4751) Seems To Use Debt Rather Sparingly

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that CyberAgent, Inc. (TSE:4751) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is CyberAgent's Debt?

As you can see below, CyberAgent had JP¥96.8b of debt at June 2025, down from JP¥106.1b a year prior. However, its balance sheet shows it holds JP¥228.1b in cash, so it actually has JP¥131.3b net cash.

A Look At CyberAgent's Liabilities

The latest balance sheet data shows that CyberAgent had liabilities of JP¥153.5b due within a year, and liabilities of JP¥103.8b falling due after that. Offsetting these obligations, it had cash of JP¥228.1b as well as receivables valued at JP¥85.9b due within 12 months. So it can boast JP¥56.8b more liquid assets than total liabilities.

This surplus suggests that CyberAgent has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that CyberAgent has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for CyberAgent

In addition to that, we're happy to report that CyberAgent has boosted its EBIT by 41%, thus reducing the spectre of future debt repayments. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if CyberAgent can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While CyberAgent 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. Looking at the most recent three years, CyberAgent recorded free cash flow of 32% of its EBIT, which is weaker than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

While it is always sensible to investigate a company's debt, in this case CyberAgent has JP¥131.3b in net cash and a decent-looking balance sheet. And it impressed us with its EBIT growth of 41% over the last year. So we don't think CyberAgent's use of debt is risky. Over time, share prices tend to follow earnings per share, so if you're interested in CyberAgent, you may well want to click here to check an interactive graph of its earnings per share history.

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.