TBS HoldingsInc (TSE:9401) Has A Pretty Healthy Balance Sheet

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.' 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 TBS Holdings,Inc. (TSE:9401) makes use of debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is TBS HoldingsInc's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 TBS HoldingsInc had JP¥14.0b of debt, an increase on JP¥3.68b, over one year. But it also has JP¥51.8b in cash to offset that, meaning it has JP¥37.8b net cash.

A Look At TBS HoldingsInc's Liabilities

We can see from the most recent balance sheet that TBS HoldingsInc had liabilities of JP¥84.8b falling due within a year, and liabilities of JP¥285.2b due beyond that. Offsetting these obligations, it had cash of JP¥51.8b as well as receivables valued at JP¥78.5b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by JP¥239.7b.

While this might seem like a lot, it is not so bad since TBS HoldingsInc has a market capitalization of JP¥841.6b, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. While it does have liabilities worth noting, TBS HoldingsInc also has more cash than debt, so we're pretty confident it can manage its debt safely.

Check out our latest analysis for TBS HoldingsInc

In addition to that, we're happy to report that TBS HoldingsInc has boosted its EBIT by 48%, 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 TBS HoldingsInc can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. TBS HoldingsInc 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. In the last three years, TBS HoldingsInc's free cash flow amounted to 22% of its EBIT, less than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

Although TBS HoldingsInc's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of JP¥37.8b. And we liked the look of last year's 48% year-on-year EBIT growth. So we are not troubled with TBS HoldingsInc's debt use. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 1 warning sign for TBS HoldingsInc that you should be aware of before investing here.

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.