Is Healios K.K (TSE:4593) Using Too Much Debt?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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. As with many other companies Healios K.K. (TSE:4593) makes use of debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

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. 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 step when considering a company's debt levels is to consider its cash and debt together.

What Is Healios K.K's Debt?

The image below, which you can click on for greater detail, shows that Healios K.K had debt of JP¥2.05b at the end of March 2025, a reduction from JP¥4.43b over a year. But on the other hand it also has JP¥5.46b in cash, leading to a JP¥3.41b net cash position.

How Strong Is Healios K.K's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Healios K.K had liabilities of JP¥5.03b due within 12 months and liabilities of JP¥8.69b due beyond that. On the other hand, it had cash of JP¥5.46b and JP¥114.0m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by JP¥8.14b.

Of course, Healios K.K has a market capitalization of JP¥45.8b, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, Healios K.K also has more cash than debt, so we're pretty confident it can manage its debt safely. 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 Healios K.K'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 Healios K.K

In the last year Healios K.K wasn't profitable at an EBIT level, but managed to grow its revenue by 374%, to JP¥588m. When it comes to revenue growth, that's like nailing the game winning 3-pointer!

So How Risky Is Healios K.K?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that Healios K.K had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of JP¥2.3b and booked a JP¥4.4b accounting loss. However, it has net cash of JP¥3.41b, so it has a bit of time before it will need more capital. The good news for shareholders is that Healios K.K has dazzling revenue growth, so there's a very good chance it can boost its free cash flow in the years to come. While unprofitable companies can be risky, they can also grow hard and fast in those pre-profit years. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 3 warning signs we've spotted with Healios K.K (including 1 which is concerning) .

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.