3-D Matrix (TSE:7777) Is Carrying A Fair Bit Of Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that 3-D Matrix, Ltd. (TSE:7777) does have debt on its balance sheet. 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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does 3-D Matrix Carry?

You can click the graphic below for the historical numbers, but it shows that 3-D Matrix had JP¥2.33b of debt in July 2025, down from JP¥4.17b, one year before. However, it also had JP¥1.49b in cash, and so its net debt is JP¥833.0m.

A Look At 3-D Matrix's Liabilities

The latest balance sheet data shows that 3-D Matrix had liabilities of JP¥1.59b due within a year, and liabilities of JP¥2.10b falling due after that. Offsetting these obligations, it had cash of JP¥1.49b as well as receivables valued at JP¥2.02b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by JP¥168.0m.

Having regard to 3-D Matrix's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the JP¥35.9b company is struggling for cash, we still think it's worth monitoring its balance sheet. When analysing debt levels, the balance sheet is the obvious place to start. But it is 3-D Matrix'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.

Check out our latest analysis for 3-D Matrix

In the last year 3-D Matrix wasn't profitable at an EBIT level, but managed to grow its revenue by 46%, to JP¥7.6b. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Even though 3-D Matrix managed to grow its top line quite deftly, the cold hard truth is that it is losing money on the EBIT line. Indeed, it lost JP¥830m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled JP¥1.7b in negative free cash flow over the last twelve months. So to be blunt we think it is risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Be aware that 3-D Matrix is showing 3 warning signs in our investment analysis , and 2 of those make us uncomfortable...

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.