Is Money Forward (TSE:3994) Weighed On By Its Debt Load?

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.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies Money Forward, Inc. (TSE:3994) makes use of debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Money Forward Carry?

You can click the graphic below for the historical numbers, but it shows that as of May 2025 Money Forward had JP¥33.4b of debt, an increase on JP¥31.1b, over one year. However, its balance sheet shows it holds JP¥38.6b in cash, so it actually has JP¥5.17b net cash.

How Healthy Is Money Forward's Balance Sheet?

According to the last reported balance sheet, Money Forward had liabilities of JP¥35.8b due within 12 months, and liabilities of JP¥22.7b due beyond 12 months. Offsetting this, it had JP¥38.6b in cash and JP¥16.7b in receivables that were due within 12 months. So its liabilities total JP¥3.26b more than the combination of its cash and short-term receivables.

Having regard to Money Forward'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¥315.5b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, Money Forward 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 ultimately the future profitability of the business will decide if Money Forward can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

View our latest analysis for Money Forward

In the last year Money Forward wasn't profitable at an EBIT level, but managed to grow its revenue by 21%, to JP¥44b. With any luck the company will be able to grow its way to profitability.

So How Risky Is Money Forward?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And in the last year Money Forward had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through JP¥7.8b of cash and made a loss of JP¥5.9b. But the saving grace is the JP¥5.17b on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Money Forward's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. Pre-profit companies are often risky, but they can also offer great rewards. 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. Be aware that Money Forward is showing 1 warning sign in our investment analysis , you should know about...

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.