Is JINS HOLDINGS (TSE:3046) A Risky Investment?

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. Importantly, JINS HOLDINGS Inc. (TSE:3046) does carry debt. But the real question is whether this debt is making the company risky.

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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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is JINS HOLDINGS's Net Debt?

As you can see below, JINS HOLDINGS had JP¥5.40b of debt at May 2025, down from JP¥11.8b a year prior. But it also has JP¥9.93b in cash to offset that, meaning it has JP¥4.52b net cash.

How Healthy Is JINS HOLDINGS' Balance Sheet?

According to the last reported balance sheet, JINS HOLDINGS had liabilities of JP¥20.0b due within 12 months, and liabilities of JP¥3.82b due beyond 12 months. Offsetting these obligations, it had cash of JP¥9.93b as well as receivables valued at JP¥7.05b due within 12 months. So it has liabilities totalling JP¥6.79b more than its cash and near-term receivables, combined.

Given JINS HOLDINGS has a market capitalization of JP¥180.9b, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, JINS HOLDINGS boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for JINS HOLDINGS

In addition to that, we're happy to report that JINS HOLDINGS has boosted its EBIT by 87%, thus reducing the spectre of future debt repayments. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if JINS HOLDINGS can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. JINS HOLDINGS may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the most recent three years, JINS HOLDINGS recorded free cash flow worth 71% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that JINS HOLDINGS has JP¥4.52b in net cash. And it impressed us with its EBIT growth of 87% over the last year. So is JINS HOLDINGS'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 JINS HOLDINGS, you may well want to click here to check an interactive graph of its earnings per share history.

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.

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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.