Is miratap (TSE:3187) A Risky Investment?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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. Importantly, miratap inc. (TSE:3187) 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 and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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, 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 miratap's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 miratap had JP¥3.55b of debt, an increase on JP¥3.24b, over one year. However, because it has a cash reserve of JP¥1.54b, its net debt is less, at about JP¥2.01b.

How Healthy Is miratap's Balance Sheet?

According to the last reported balance sheet, miratap had liabilities of JP¥5.03b due within 12 months, and liabilities of JP¥1.31b due beyond 12 months. On the other hand, it had cash of JP¥1.54b and JP¥921.0m worth of receivables due within a year. So it has liabilities totalling JP¥3.88b more than its cash and near-term receivables, combined.

This deficit is considerable relative to its market capitalization of JP¥5.58b, so it does suggest shareholders should keep an eye on miratap's use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if miratap 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.

View our latest analysis for miratap

In the last year miratap wasn't profitable at an EBIT level, but managed to grow its revenue by 3.1%, to JP¥17b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months miratap produced an earnings before interest and tax (EBIT) loss. Indeed, it lost JP¥100m 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¥737m in negative free cash flow over the last twelve months. 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. However, not all investment risk resides within the balance sheet - far from it. To that end, you should learn about the 3 warning signs we've spotted with miratap (including 2 which shouldn't be ignored) .

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.