Health Check: How Prudently Does J Escom HoldingsInc (TSE:3779) Use Debt?

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.' 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. We note that J Escom Holdings,Inc. (TSE:3779) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does J Escom HoldingsInc Carry?

The image below, which you can click on for greater detail, shows that J Escom HoldingsInc had debt of JP¥261.0m at the end of September 2025, a reduction from JP¥427.0m over a year. But it also has JP¥1.14b in cash to offset that, meaning it has JP¥883.0m net cash.

How Healthy Is J Escom HoldingsInc's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that J Escom HoldingsInc had liabilities of JP¥1.13b due within 12 months and liabilities of JP¥16.0m due beyond that. Offsetting this, it had JP¥1.14b in cash and JP¥356.0m in receivables that were due within 12 months. So it actually has JP¥354.0m more liquid assets than total liabilities.

It's good to see that J Escom HoldingsInc has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Simply put, the fact that J Escom HoldingsInc has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since J Escom HoldingsInc will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for J Escom HoldingsInc

Over 12 months, J Escom HoldingsInc reported revenue of JP¥1.4b, which is a gain of 9.9%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is J Escom HoldingsInc?

While J Escom HoldingsInc lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of JP¥449m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 2 warning signs for J Escom HoldingsInc that you should be aware of.

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.