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HOYA (TSE:7741) Has A Rock Solid Balance Sheet

Simply Wall St · 2d ago

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.' 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. Importantly, HOYA Corporation (TSE:7741) does carry debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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 HOYA's Debt?

The image below, which you can click on for greater detail, shows that at September 2025 HOYA had debt of JP¥41.5b, up from JP¥31.7b in one year. But it also has JP¥596.4b in cash to offset that, meaning it has JP¥554.9b net cash.

debt-equity-history-analysis
TSE:7741 Debt to Equity History December 8th 2025

How Healthy Is HOYA's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that HOYA had liabilities of JP¥191.2b due within 12 months and liabilities of JP¥89.3b due beyond that. Offsetting this, it had JP¥596.4b in cash and JP¥190.9b in receivables that were due within 12 months. So it can boast JP¥506.8b more liquid assets than total liabilities.

This short term liquidity is a sign that HOYA could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, HOYA boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for HOYA

Also good is that HOYA grew its EBIT at 17% over the last year, further increasing its ability to manage debt. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine HOYA's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While HOYA has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the most recent three years, HOYA recorded free cash flow worth 78% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While it is always sensible to investigate a company's debt, in this case HOYA has JP¥554.9b in net cash and a decent-looking balance sheet. The cherry on top was that in converted 78% of that EBIT to free cash flow, bringing in JP¥194b. So we don't think HOYA's use of debt is risky. Over time, share prices tend to follow earnings per share, so if you're interested in HOYA, you may well want to click here to check an interactive graph of its earnings per share history.

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