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.' 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 Zhejiang Windey Co.,Ltd. (SZSE:300772) makes use of debt. But should shareholders be worried about its use of debt?
Why Does Debt Bring Risk?
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 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.
See our latest analysis for Zhejiang WindeyLtd
What Is Zhejiang WindeyLtd's Debt?
The image below, which you can click on for greater detail, shows that Zhejiang WindeyLtd had debt of CN¥749.9m at the end of March 2022, a reduction from CN¥991.7m over a year. However, its balance sheet shows it holds CN¥4.05b in cash, so it actually has CN¥3.30b net cash.
SZSE:300772 Debt to Equity History August 16th 2022
A Look At Zhejiang WindeyLtd's Liabilities
Zooming in on the latest balance sheet data, we can see that Zhejiang WindeyLtd had liabilities of CN¥19.3b due within 12 months and liabilities of CN¥2.48b due beyond that. On the other hand, it had cash of CN¥4.05b and CN¥8.58b worth of receivables due within a year. So its liabilities total CN¥9.10b more than the combination of its cash and short-term receivables.
This deficit is considerable relative to its market capitalization of CN¥13.5b, so it does suggest shareholders should keep an eye on Zhejiang WindeyLtd's use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. While it does have liabilities worth noting, Zhejiang WindeyLtd also has more cash than debt, so we're pretty confident it can manage its debt safely.
Better yet, Zhejiang WindeyLtd grew its EBIT by 295% last year, which is an impressive improvement. If maintained that growth will make the debt even more manageable in the years ahead. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Zhejiang WindeyLtd can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.
Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Zhejiang WindeyLtd may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last three years, Zhejiang WindeyLtd recorded negative free cash flow, in total. Debt is far more risky for companies with unreliable free cash flow, so shareholders should be hoping that the past expenditure will produce free cash flow in the future.
Summing Up
Although Zhejiang WindeyLtd's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of CN¥3.30b. And we liked the look of last year's 295% year-on-year EBIT growth. So we don't have any problem with Zhejiang WindeyLtd's use of debt. 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. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Zhejiang WindeyLtd (of which 1 is a bit unpleasant!) 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
传奇基金经理理想汽车·卢曾说,最大的投资风险不是价格的波动,而是你是否会遭受永久性的资本损失。当我们考虑一家公司的风险有多大时,我们总是喜欢看它对债务的使用,因为债务过重可能导致破产。与许多其他公司一样浙江温迪股份有限公司(SZSE:300772)利用债务。但股东是否应该担心它的债务使用情况?
为什么债务会带来风险?
债务帮助企业,直到企业难以偿还债务,无论是用新资本还是用自由现金流。最终,如果公司不能履行其偿还债务的法定义务,股东可能会一无所有地离开。然而,更常见(但代价仍然高昂)的情况是,一家公司必须以极低的价格发行股票,永久性地稀释股东的股份,只是为了支撑其资产负债表。话虽如此,最常见的情况是一家公司对债务管理得相当好--并对自己有利。当我们考虑一家公司的债务用途时,我们首先会把现金和债务放在一起看。
查看我们对浙江WindeyLtd.的最新分析
浙江WindeyLtd的债务是什么?
你可以点击查看更多详细信息的下图显示,截至2022年3月底,浙江WindeyLtd的债务为7.499亿加元,较一年内的9.917亿加元有所减少。然而,其资产负债表显示,它持有人民币40.5亿元的现金,因此它实际上拥有人民币33亿元的净现金。
深圳证交所:300772债转股历史2022年8月16日
浙江WindeyLtd负债情况一瞥
放大最新的资产负债表数据,我们可以看到浙江温德股份有限公司有193亿加元的负债在12个月内到期,还有24.8亿加元的负债在12个月内到期。另一方面,一年内有现金40.5亿元和应收账款85.8亿元到期。因此,其负债总额为人民币91亿元,比现金和短期应收账款的总和还要多。
与其135亿元的市值相比,这一赤字是相当可观的,因此这确实表明股东应该密切关注浙江WindeyLtd的债务使用情况。如果它的贷款人要求它支撑资产负债表,股东可能会面临严重的稀释。尽管浙江WindeyLtd确实有值得注意的负债,但它的现金也多于债务,所以我们非常有信心它能够安全地管理债务。
更好的是,浙江WindeyLtd去年息税前利润增长了295%,这是一个令人印象深刻的进步。如果保持这样的增长,未来几年的债务将变得更加可控。毫无疑问,我们从资产负债表中了解到的债务最多。但最终,该业务未来的盈利能力将决定浙江WindeyLtd能否随着时间的推移加强其资产负债表。因此,如果你想看看专业人士的想法,你可能会发现这份关于分析师利润预测的免费报告很有趣。
最后,尽管税务人员可能喜欢会计利润,但贷款人只接受冷硬现金。浙江WindeyLtd的资产负债表上可能有净现金,但看看该业务将息税前收益(EBIT)转换为自由现金流的情况仍很有趣,因为这将影响其对债务的需求和管理债务的能力。在过去的三年里,浙江WindeyLtd的自由现金流总计为负。对于自由现金流不可靠的公司来说,债务的风险要大得多,因此股东们应该希望过去的支出能在未来产生自由现金流。
总结
尽管浙江文德的资产负债表不是特别强劲,但由于总负债,它的净现金为33亿元人民币,这显然是积极的。我们喜欢去年息税前利润同比增长295%的表现。因此,我们对浙江WindeyLtd的债务使用没有任何问题。毫无疑问,我们从资产负债表中了解到的债务最多。然而,并非所有投资风险都存在于资产负债表中--远非如此。这些风险可能很难发现。每家公司都有它们,我们已经发现浙江WindeyLtd.的3个警示标志(其中1个有点不愉快!)你应该知道。
归根结底,关注那些没有净债务的公司往往更好。你可以访问我们的这类公司的特别名单(都有利润增长的记录)。这是免费的。
对这篇文章有什么反馈吗?担心内容吗? 保持联系直接与我们联系。或者,也可以给编辑组发电子邮件,地址是implywallst.com。
本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。