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ENECHANGE (TSE:4169) Has Debt But No Earnings; Should You Worry?

Simply Wall St · 2d ago

Legendary fund manager Li Lu (who Charlie Munger backed) once said, '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. We can see that ENECHANGE Ltd. (TSE:4169) does use debt in its business. But the real question is whether this debt is making the company risky.

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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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is ENECHANGE's Net Debt?

The image below, which you can click on for greater detail, shows that ENECHANGE had debt of JP¥674.0m at the end of September 2025, a reduction from JP¥2.20b over a year. But on the other hand it also has JP¥4.06b in cash, leading to a JP¥3.38b net cash position.

debt-equity-history-analysis
TSE:4169 Debt to Equity History December 25th 2025

How Healthy Is ENECHANGE's Balance Sheet?

We can see from the most recent balance sheet that ENECHANGE had liabilities of JP¥1.82b falling due within a year, and liabilities of JP¥358.0m due beyond that. Offsetting these obligations, it had cash of JP¥4.06b as well as receivables valued at JP¥915.0m due within 12 months. So it actually has JP¥2.79b more liquid assets than total liabilities.

This surplus suggests that ENECHANGE is using debt in a way that is appears to be both safe and conservative. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Simply put, the fact that ENECHANGE has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since ENECHANGE will need earnings to service that debt. 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.

Check out our latest analysis for ENECHANGE

Over 12 months, ENECHANGE made a loss at the EBIT level, and saw its revenue drop to JP¥4.1b, which is a fall of 44%. To be frank that doesn't bode well.

So How Risky Is ENECHANGE?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year ENECHANGE had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through JP¥2.8b of cash and made a loss of JP¥1.2b. However, it has net cash of JP¥3.38b, so it has a bit of time before it will need more capital. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 4 warning signs for ENECHANGE (1 makes us a bit uncomfortable) you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.