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FUJITA CORPORATIONLtd (TSE:3370) Seems To Be Using A Lot Of Debt

Simply Wall St · 1d ago

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.' 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. As with many other companies FUJITA CORPORATION Co.,Ltd. (TSE:3370) makes use of debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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 FUJITA CORPORATIONLtd's Debt?

As you can see below, FUJITA CORPORATIONLtd had JP¥2.07b of debt, at September 2025, which is about the same as the year before. You can click the chart for greater detail. On the flip side, it has JP¥337.0m in cash leading to net debt of about JP¥1.73b.

debt-equity-history-analysis
TSE:3370 Debt to Equity History December 8th 2025

A Look At FUJITA CORPORATIONLtd's Liabilities

We can see from the most recent balance sheet that FUJITA CORPORATIONLtd had liabilities of JP¥876.0m falling due within a year, and liabilities of JP¥1.69b due beyond that. Offsetting these obligations, it had cash of JP¥337.0m as well as receivables valued at JP¥159.0m due within 12 months. So its liabilities total JP¥2.07b more than the combination of its cash and short-term receivables.

The deficiency here weighs heavily on the JP¥1.10b company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. After all, FUJITA CORPORATIONLtd would likely require a major re-capitalisation if it had to pay its creditors today.

View our latest analysis for FUJITA CORPORATIONLtd

We measure a company's debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.

FUJITA CORPORATIONLtd shareholders face the double whammy of a high net debt to EBITDA ratio (6.4), and fairly weak interest coverage, since EBIT is just 2.3 times the interest expense. The debt burden here is substantial. However, one redeeming factor is that FUJITA CORPORATIONLtd grew its EBIT at 16% over the last 12 months, boosting its ability to handle its debt. There's no doubt that we learn most about debt from the balance sheet. But it is FUJITA CORPORATIONLtd's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. In the last two years, FUJITA CORPORATIONLtd's free cash flow amounted to 22% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

Our View

On the face of it, FUJITA CORPORATIONLtd's net debt to EBITDA left us tentative about the stock, and its level of total liabilities was no more enticing than the one empty restaurant on the busiest night of the year. But at least it's pretty decent at growing its EBIT; that's encouraging. We're quite clear that we consider FUJITA CORPORATIONLtd to be really rather risky, as a result of its balance sheet health. So we're almost as wary of this stock as a hungry kitten is about falling into its owner's fish pond: once bitten, twice shy, as they say. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 4 warning signs for FUJITA CORPORATIONLtd (3 shouldn't be ignored!) that you should be aware of before investing here.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.