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華爾街日報Here's Why KOZO HoldingsLtd (TSE:9973) Can Afford Some Debt
David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 KOZO Holdings Co.,Ltd. (TSE:9973) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?
When Is Debt A Problem?
Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.
What Is KOZO HoldingsLtd's Net Debt?
The image below, which you can click on for greater detail, shows that KOZO HoldingsLtd had debt of JP¥858.0m at the end of September 2025, a reduction from JP¥1.07b over a year. On the flip side, it has JP¥526.0m in cash leading to net debt of about JP¥332.0m.
How Healthy Is KOZO HoldingsLtd's Balance Sheet?
According to the last reported balance sheet, KOZO HoldingsLtd had liabilities of JP¥2.72b due within 12 months, and liabilities of JP¥1.63b due beyond 12 months. Offsetting these obligations, it had cash of JP¥526.0m as well as receivables valued at JP¥1.23b due within 12 months. So its liabilities total JP¥2.60b more than the combination of its cash and short-term receivables.
This deficit isn't so bad because KOZO HoldingsLtd is worth JP¥8.63b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine KOZO HoldingsLtd's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
View our latest analysis for KOZO HoldingsLtd
Over 12 months, KOZO HoldingsLtd reported revenue of JP¥19b, which is a gain of 8.9%, 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.
Caveat Emptor
Over the last twelve months KOZO HoldingsLtd produced an earnings before interest and tax (EBIT) loss. Indeed, it lost JP¥367m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled JP¥733m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. We've identified 3 warning signs with KOZO HoldingsLtd (at least 2 which are concerning) , and understanding them should be part of your investment process.
At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.
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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.