Is Astroscale Holdings (TSE:186A) Using Too Much Debt?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Astroscale Holdings Inc. (TSE:186A) makes use of debt. But the more important question is: how much risk is that debt creating?

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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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Astroscale Holdings Carry?

As you can see below, Astroscale Holdings had JP¥8.42b of debt at October 2025, down from JP¥10.8b a year prior. However, it does have JP¥20.0b in cash offsetting this, leading to net cash of JP¥11.6b.

A Look At Astroscale Holdings' Liabilities

The latest balance sheet data shows that Astroscale Holdings had liabilities of JP¥16.5b due within a year, and liabilities of JP¥6.99b falling due after that. On the other hand, it had cash of JP¥20.0b and JP¥1.57b worth of receivables due within a year. So its liabilities total JP¥1.86b more than the combination of its cash and short-term receivables.

This state of affairs indicates that Astroscale Holdings' balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the JP¥139.2b company is short on cash, but still worth keeping an eye on the balance sheet. Despite its noteworthy liabilities, Astroscale Holdings boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Astroscale Holdings 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.

See our latest analysis for Astroscale Holdings

Over 12 months, Astroscale Holdings reported revenue of JP¥4.4b, which is a gain of 85%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

So How Risky Is Astroscale Holdings?

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 Astroscale Holdings had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through JP¥16b of cash and made a loss of JP¥11b. But at least it has JP¥11.6b on the balance sheet to spend on growth, near-term. Astroscale Holdings'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. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Astroscale Holdings (of which 1 is potentially serious!) you should know about.

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.