Is PhoenixBio (TSE:6190) Using Too Much 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.' 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. Importantly, PhoenixBio Co., Ltd. (TSE:6190) does carry debt. But the real question is whether this debt is making the company risky.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Why Does Debt Bring Risk?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

What Is PhoenixBio's Debt?

As you can see below, PhoenixBio had JP¥359.0m of debt at September 2025, down from JP¥439.0m a year prior. However, it does have JP¥911.0m in cash offsetting this, leading to net cash of JP¥552.0m.

How Strong Is PhoenixBio's Balance Sheet?

We can see from the most recent balance sheet that PhoenixBio had liabilities of JP¥419.0m falling due within a year, and liabilities of JP¥302.0m due beyond that. Offsetting these obligations, it had cash of JP¥911.0m as well as receivables valued at JP¥217.0m due within 12 months. So it can boast JP¥407.0m more liquid assets than total liabilities.

It's good to see that PhoenixBio has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, PhoenixBio boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is PhoenixBio's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for PhoenixBio

Over 12 months, PhoenixBio made a loss at the EBIT level, and saw its revenue drop to JP¥1.5b, which is a fall of 7.0%. We would much prefer see growth.

So How Risky Is PhoenixBio?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that PhoenixBio had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through JP¥189m of cash and made a loss of JP¥312m. But the saving grace is the JP¥552.0m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. We've identified 2 warning signs with PhoenixBio (at least 1 which is concerning) , and understanding them should be part of your investment process.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.