These 4 Measures Indicate That SKY Perfect JSAT Holdings (TSE:9412) Is Using Debt Safely

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 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 SKY Perfect JSAT Holdings Inc. (TSE:9412) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does SKY Perfect JSAT Holdings Carry?

As you can see below, SKY Perfect JSAT Holdings had JP¥39.2b of debt at September 2025, down from JP¥60.5b a year prior. However, it does have JP¥100.9b in cash offsetting this, leading to net cash of JP¥61.7b.

How Strong Is SKY Perfect JSAT Holdings' Balance Sheet?

The latest balance sheet data shows that SKY Perfect JSAT Holdings had liabilities of JP¥64.1b due within a year, and liabilities of JP¥43.1b falling due after that. Offsetting these obligations, it had cash of JP¥100.9b as well as receivables valued at JP¥95.0b due within 12 months. So it actually has JP¥88.8b more liquid assets than total liabilities.

This surplus suggests that SKY Perfect JSAT Holdings is using debt in a way that is appears to be both safe and conservative. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Simply put, the fact that SKY Perfect JSAT Holdings has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for SKY Perfect JSAT Holdings

Also good is that SKY Perfect JSAT Holdings grew its EBIT at 14% over the last year, further increasing its ability to manage debt. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if SKY Perfect JSAT Holdings 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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While SKY Perfect JSAT Holdings 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. Over the last three years, SKY Perfect JSAT Holdings recorded free cash flow worth a fulsome 80% of its EBIT, which is stronger than we'd usually expect. That positions it well to pay down debt if desirable to do so.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that SKY Perfect JSAT Holdings has net cash of JP¥61.7b, as well as more liquid assets than liabilities. And it impressed us with free cash flow of JP¥12b, being 80% of its EBIT. So is SKY Perfect JSAT Holdings's debt a risk? It doesn't seem so to us. 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. Be aware that SKY Perfect JSAT Holdings is showing 1 warning sign in our investment analysis , you should know about...

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.