markdown

Debt: The Double-Edged Sword

Let’s kick things off with a quote from the legendary Li Lu, the guy Munger backed: “The biggest investment risk isn’t price swings but the chance of a capital wipeout.” When we eyeball a company’s risk, debt is our first stop. An overload could spell disaster. So, what’s the scoop with Tsumura & Co. (TSE:4540) and its use of debt? Could it be risky business?

Unleashing American Energy

Trump pledged to “unleash” American oil and gas. For those keeping score, these 15 US stocks have developments ready to ride that wave. Check them out here.

When is Debt Dangerous?

Debt’s a friend until it isn’t. If a company can’t pay it down with new capital or free cash flow, trouble’s brewing. Worst case? Lenders take over. More often, though, companies dilute their stocks at bargain-bin prices to manage debt. Ideally, a company uses debt smartly to its advantage. So, let’s look at cash versus debt first.

Tsumura’s Net Debt: The Numbers

Want the historical digits? Click here, but as of September 2025, Tsumura packed JP¥114.9b in debt, up from JP¥71.4b last year. They’ve got JP¥73.2b in cash, so net debt rounds out to about JP¥41.7b.

Tsumura’s Balance Sheet: Health Check

Tsumura’s latest balance sheet shows JP¥103.4b in liabilities due soon and another JP¥86.6b down the road. With JP¥73.2b in cash and JP¥75.3b in receivables, they’re JP¥41.5b short. But considering a market cap of JP¥311.2b, they seem pretty stable—for now.

For a deeper dive, here’s our latest analysis for Tsumura.

Debt Load: A Closer Look

We peep at net debt against earnings and how EBIT covers interest expenses—think interest cover ratio. Tsumura’s net debt is just 0.87 times EBITDA, which is smooth sailing. They even raked in more interest than they forked out last year. Sweet, right?

Also, a 17% pop in EBIT last year makes debt less of a beast. Balance sheets? Important, but it’s future profitability that’ll shift the needle. Curious professionals might dig this free analyst profit forecast report.

Free Cash Flow: The Real Deal

Debt repayment needs free cash flow; profits on paper won’t cut it. In the past three years, Tsumura’s free cash flow’s been in the red. Not a great look. Let’s hope their spending translates into future cash. Debt’s riskier when cash flow’s wonky.

Our Take

Tsumura’s interest cover keeps us calm, but their EBIT-to-free-cash-flow conversion gives us pause. All said, Tsumura seems poised to manage their debt. But hey, always keep an eye on high debt levels. Want more? Spot the 1 warning sign with Tsumura.

Sometimes, it’s a breeze focusing on companies that don’t need debt at all. Want to explore growth stocks with zero net debt? Check out this list, free of charge.

Crack the Valuation Code

Wonder if Tsumura’s undervalued or over the moon? Our detailed analysis uncovers fair value estimates, big risks, dividends, insider moves, and more. Access Free Analysis.

Got thoughts on this article? Concerns about the content? Reach out to us directly or email editorial-team (at) simplywallst.com.

This piece by Simply Wall St is purely informational, pulling from historical data and expert forecasts. It’s not a buy/sell pitch and skips your personal objectives. We focus on long-term analysis drawn from fundamentals. Note that our take doesn’t always include the freshest price-sensitive company news or qualitative insights. Simply Wall St doesn’t have skin in any of these stocks.