Here's Why Konami Group (TSE:9766) Can Manage Its Debt Responsibly

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.' 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. As with many other companies Konami Group Corporation (TSE:9766) makes use of debt. But the real question is whether this debt is making the company risky.

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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. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Konami Group's Debt?

As you can see below, Konami Group had JP¥59.9b of debt, at June 2025, which is about the same as the year before. You can click the chart for greater detail. But on the other hand it also has JP¥279.9b in cash, leading to a JP¥220.0b net cash position.

How Healthy Is Konami Group's Balance Sheet?

We can see from the most recent balance sheet that Konami Group had liabilities of JP¥98.5b falling due within a year, and liabilities of JP¥66.9b due beyond that. Offsetting these obligations, it had cash of JP¥279.9b as well as receivables valued at JP¥40.3b due within 12 months. So it can boast JP¥154.8b more liquid assets than total liabilities.

This short term liquidity is a sign that Konami Group could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Konami Group has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for Konami Group

And we also note warmly that Konami Group grew its EBIT by 15% last year, making its debt load easier to handle. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Konami Group's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Konami Group 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, Konami Group recorded free cash flow of 50% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While it is always sensible to investigate a company's debt, in this case Konami Group has JP¥220.0b in net cash and a decent-looking balance sheet. On top of that, it increased its EBIT by 15% in the last twelve months. So is Konami Group's debt a risk? It doesn't seem so to us. Over time, share prices tend to follow earnings per share, so if you're interested in Konami Group, you may well want to click here to check an interactive graph of its earnings per share history.

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.