So, let’s get straight to it. Legendary fund manager Li Lu once dropped some serious wisdom. He said, ‘The biggest investment risk isn’t price volatility, but whether you’ll suffer a permanent loss of capital.’ When we’re talking risk in a business, we’ve got to start with debt. Too much of it can spell disaster. Tsumura & Co. (TSE:4540) has some debt in the mix. But is it a red flag?
Contents
when debt becomes dicey
Debt, when used smartly, can be a jack of all trades. However, when a company struggles to pay it off with new capital or free cash flow, things get tricky. Worst-case scenario, lenders might swoop in and take charge. More often, shareholders get hit with dilution at dirt-cheap prices. Most times though, a company plays its cards right and handles debt to its advantage. To gauge this, we look at cash and debt together.
And speaking of developments in stocks, over here, Trump’s energy push made magic for 15 U.S. stocks.
Tsumura’s net debt situation
If you’re curious, you can check this graphic for the numbers. Fast forward to September 2025, Tsumura clocked JP¥114.9b in debt, up from JP¥71.4b the year before. On the flip side, they’ve got JP¥73.2b in cash, leaving them with net debt around JP¥41.7b.
taking a peek at tsumura’s balance sheet
Recently, Tsumura had liabilities of JP¥103.4b due within a year and another JP¥86.6b beyond that. Offsetting this are JP¥73.2b in cash and JP¥75.3b in short-term receivables. So, liabilities trump cash and receivables by JP¥41.5b. Given their market cap of JP¥311.2b, this isn’t a panic moment, but worth watching.
Take a look at our latest analysis for the lowdown on Tsumura.
Analyzing debt with ebitda
We pit a company’s debt against its earnings power using its net debt to EBITDA ratio and its interest cover—how much EBIT covers interest expenses. Tsumura’s debt is just 0.87 times EBITDA, meaning they could ratchet up leverage pretty easily. Plus, they earned more interest than they paid. Like a pro, they’ve managed to grow EBIT by 17% last year.
what about free cash flow?
Free cash flow pays off debt—not fancy accounting numbers. Over the past three years, Tsumura posted negative free cash flow. Unreliable cash flow makes debt risky, but hopefully, past spending results in future flow.
what we think
Tsumura’s got decent interest cover—a green flag for debt management. However, its conversion of EBIT to free cash flow? Not so warm and fuzzy. Looking at everything, Tsumura’s handling debt well, but keep an eye on those levels. The balance sheet’s crucial, yet risks often lurk beyond those numbers. Speaking of which, there’s 1 warning sign we’ve clocked.
Bottom line? Sometimes it’s a breeze sticking to companies that dodge debt. Check out a list of debt-free growth stocks—free for grabs!
Need to dive deeper into Tsumura’s worth? Our thorough analysis breaks down fair value, risks, and more. Access it here.
Got thoughts on this article or something bugging you? Reach out to us directly or shoot an email to editorial-team (at) simplywallst.com.
This piece by Simply Wall St is all about data-driven insights, not financial advice. Remember, our take might not factor in the latest announcements. Simply Wall St has no stock positions mentioned.
