Is NaigaiLtd (TSE:8013) A Risky Investment?

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Naigai Co.,Ltd. (TSE:8013) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is NaigaiLtd's Debt?

As you can see below, at the end of October 2025, NaigaiLtd had JP¥1.88b of debt, up from JP¥1.69b a year ago. Click the image for more detail. But on the other hand it also has JP¥2.81b in cash, leading to a JP¥927.0m net cash position.

How Strong Is NaigaiLtd's Balance Sheet?

The latest balance sheet data shows that NaigaiLtd had liabilities of JP¥4.31b due within a year, and liabilities of JP¥1.70b falling due after that. Offsetting these obligations, it had cash of JP¥2.81b as well as receivables valued at JP¥2.34b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by JP¥863.0m.

While this might seem like a lot, it is not so bad since NaigaiLtd has a market capitalization of JP¥2.38b, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. Despite its noteworthy liabilities, NaigaiLtd 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 it is NaigaiLtd's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for NaigaiLtd

In the last year NaigaiLtd wasn't profitable at an EBIT level, but managed to grow its revenue by 2.5%, to JP¥13b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is NaigaiLtd?

Although NaigaiLtd had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of JP¥22m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. Until we see some positive EBIT, we're a bit cautious of the stock, not least because of the rather modest revenue growth. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. We've identified 2 warning signs with NaigaiLtd , and understanding them should be part of your investment process.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.