The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. We note that Sinotruk Jinan Truck Co., Ltd. (SZSE:000951) does have debt on its balance sheet. But is this debt a concern to shareholders?
What Risk Does Debt Bring?
Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. 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. 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. The first step when considering a company's debt levels is to consider its cash and debt together.
See our latest analysis for Sinotruk Jinan Truck
What Is Sinotruk Jinan Truck's Debt?
You can click the graphic below for the historical numbers, but it shows that Sinotruk Jinan Truck had CN¥1.00b of debt in March 2022, down from CN¥1.70b, one year before. However, its balance sheet shows it holds CN¥9.85b in cash, so it actually has CN¥8.85b net cash.
SZSE:000951 Debt to Equity History August 7th 2022
How Strong Is Sinotruk Jinan Truck's Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Sinotruk Jinan Truck had liabilities of CN¥21.4b due within 12 months and liabilities of CN¥390.2m due beyond that. Offsetting these obligations, it had cash of CN¥9.85b as well as receivables valued at CN¥14.2b due within 12 months. So it can boast CN¥2.32b more liquid assets than total liabilities.
It's good to see that Sinotruk Jinan Truck has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, Sinotruk Jinan Truck boasts net cash, so it's fair to say it does not have a heavy debt load!
The modesty of its debt load may become crucial for Sinotruk Jinan Truck if management cannot prevent a repeat of the 72% cut to EBIT over the last year. When it comes to paying off debt, falling earnings are no more useful than sugary sodas are for your health. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Sinotruk Jinan Truck 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. Sinotruk Jinan Truck 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. Happily for any shareholders, Sinotruk Jinan Truck actually produced more free cash flow than EBIT over the last three years. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.
Summing Up
While we empathize with investors who find debt concerning, you should keep in mind that Sinotruk Jinan Truck has net cash of CN¥8.85b, as well as more liquid assets than liabilities. The cherry on top was that in converted 138% of that EBIT to free cash flow, bringing in CN¥4.3b. So is Sinotruk Jinan Truck's debt a risk? It doesn't seem so to us. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 3 warning signs for Sinotruk Jinan Truck that you should be aware of before investing here.
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.
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.
伯克希爾哈撒韋的外部基金經理理想汽車·盧直言不諱地説,最大的投資風險不是價格的波動,而是你是否會遭受永久性的資本損失。當你考察一家公司的風險有多大時,考慮它的資產負債表是很自然的,因為當一家企業倒閉時,債務往往會涉及到它。我們注意到中國重汽濟南卡車有限公司(SZSE:000951)的資產負債表上確實有債務。但這筆債務對股東來説是一個擔憂嗎?
債務會帶來什麼風險?
債務是幫助企業發展的一種工具,但如果一家企業無法償還貸款人的債務,那麼它就只能聽從貸款人的擺佈。最終,如果公司不能履行其償還債務的法定義務,股東可能會一無所有地離開。然而,更常見(但代價仍然高昂)的情況是,一家公司必須以極低的價格發行股票,永久性地稀釋股東的股份,只是為了支撐其資產負債表。當然,債務的好處是,它往往代表着廉價資本,特別是當它用能夠以高回報率進行再投資的能力取代公司的稀釋時。在考慮一家公司的債務水平時,第一步是同時考慮其現金和債務。
查看我們對中國重汽濟南卡車的最新分析
中國重汽濟南卡車的債務是什麼?
你可以點擊下圖查看歷史數據,但它顯示了中國重汽濟南卡車在2022年3月的債務為人民幣1.億元,低於一年前的人民幣17.億元。然而,其資產負債表顯示,它持有人民幣98.5億元現金,因此它實際上擁有人民幣88.5億元的淨現金。
深交所:000951債轉股歷史2022年8月7日
中國重汽濟南卡車的資產負債表有多強?
放大最新的資產負債表數據,我們可以看到,中國重汽濟南卡車有214億加元的負債在12個月內到期,還有3.902億加元的負債在12個月內到期。作為對這些債務的抵銷,該公司有98.5億加元的現金以及價值142億加元的應收賬款在12個月內到期。因此,它可以吹噓自己的流動資產比總計負債。
很高興看到中國重汽濟南卡車的資產負債表上有充足的流動性,這表明其對負債的管理是保守的。由於其強大的淨資產狀況,它不太可能面臨與貸款人的問題。簡而言之,中國重汽濟南卡車擁有淨現金,可以説它沒有沉重的債務負擔!
如果管理層不能防止去年息税前利潤削減72%的情況重演,那麼對中國重汽濟南卡車來説,適度的債務負擔可能變得至關重要。説到還債,收入下降並不比含糖汽水對你的健康有什麼用處。當你分析債務時,資產負債表顯然是你關注的領域。但最終,該業務未來的盈利能力將決定中國重汽濟南卡車能否隨着時間的推移加強其資產負債表。因此,如果你想看看專業人士的想法,你可能會發現這份關於分析師利潤預測的免費報告很有趣。
最後,儘管税務人員可能喜歡會計利潤,但貸款人只接受冷硬現金。中國重汽濟南卡車的資產負債表上可能有淨現金,但看看該業務將息税前利潤(EBIT)轉換為自由現金流的情況仍很有趣,因為這將影響其對債務的需求和管理債務的能力。令所有股東感到高興的是,中國重汽濟南卡車在過去三年裏產生的自由現金流實際上超過了息税前利潤。這種強大的搖錢樹就像一隻穿着大黃蜂西裝的小狗一樣温暖着我們的心。
總結
雖然我們同情投資者對債務的擔憂,但您應該記住,中國重汽濟南卡車的淨現金為88.5億元人民幣,流動資產多於負債。上面的櫻桃是IN將其中138%的EBIT轉換為自由現金流,帶來了43億元人民幣的收入。那麼,中國重汽濟南卡車的債務是否存在風險?但在我們看來並非如此。當你分析債務時,資產負債表顯然是你關注的領域。然而,並非所有投資風險都存在於資產負債表中--遠非如此。例如,我們發現中國重汽濟南卡車的3個警告標誌在這裏投資之前你應該意識到這一點。
如果你有興趣投資於可以在沒有債務負擔的情況下增長利潤的企業,那麼看看這個免費資產負債表上有淨現金的成長型企業名單。
對這篇文章有什麼反饋嗎?擔心內容嗎? 保持聯繫直接與我們聯繫。或者,也可以給編輯組發電子郵件,地址是implywallst.com。
本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。