JCR Pharmaceuticals (TSE:4552) Is Making Moderate Use Of Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. Importantly, JCR Pharmaceuticals Co., Ltd. (TSE:4552) does carry debt. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is JCR Pharmaceuticals's Debt?

The image below, which you can click on for greater detail, shows that at March 2025 JCR Pharmaceuticals had debt of JP¥38.1b, up from JP¥23.3b in one year. However, because it has a cash reserve of JP¥13.2b, its net debt is less, at about JP¥24.9b.

A Look At JCR Pharmaceuticals' Liabilities

According to the last reported balance sheet, JCR Pharmaceuticals had liabilities of JP¥44.0b due within 12 months, and liabilities of JP¥13.4b due beyond 12 months. On the other hand, it had cash of JP¥13.2b and JP¥12.2b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by JP¥32.0b.

This deficit isn't so bad because JCR Pharmaceuticals is worth JP¥72.9b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine JCR Pharmaceuticals'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.

Check out our latest analysis for JCR Pharmaceuticals

In the last year JCR Pharmaceuticals had a loss before interest and tax, and actually shrunk its revenue by 23%, to JP¥33b. That makes us nervous, to say the least.

Caveat Emptor

Not only did JCR Pharmaceuticals's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Indeed, it lost JP¥6.8b at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through JP¥15b of cash over the last year. So suffice it to say we consider the stock very risky. 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. For example - JCR Pharmaceuticals has 3 warning signs we think you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.