Is Taiyo TechnolexLtd (TSE:6663) Using Debt Sensibly?

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. We note that Taiyo Technolex Co.,Ltd. (TSE:6663) does have debt on its balance sheet. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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 examine debt levels, we first consider both cash and debt levels, together.

What Is Taiyo TechnolexLtd's Debt?

You can click the graphic below for the historical numbers, but it shows that Taiyo TechnolexLtd had JP¥958.0m of debt in June 2025, down from JP¥1.03b, one year before. But it also has JP¥1.87b in cash to offset that, meaning it has JP¥914.0m net cash.

A Look At Taiyo TechnolexLtd's Liabilities

The latest balance sheet data shows that Taiyo TechnolexLtd had liabilities of JP¥1.22b due within a year, and liabilities of JP¥1.18b falling due after that. Offsetting these obligations, it had cash of JP¥1.87b as well as receivables valued at JP¥584.0m due within 12 months. So it can boast JP¥58.0m more liquid assets than total liabilities.

This short term liquidity is a sign that Taiyo TechnolexLtd could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Taiyo TechnolexLtd has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Taiyo TechnolexLtd's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Check out our latest analysis for Taiyo TechnolexLtd

In the last year Taiyo TechnolexLtd's revenue was pretty flat, and it made a negative EBIT. While that hardly impresses, its not too bad either.

So How Risky Is Taiyo TechnolexLtd?

Although Taiyo TechnolexLtd had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of JP¥86m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 2 warning signs for Taiyo TechnolexLtd you should be aware of.

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.