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. We note that Lecron Industrial Development Group Co., Ltd. (SZSE:300343) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.
When Is Debt A Problem?
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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.
Check out our latest analysis for Lecron Industrial Development Group
What Is Lecron Industrial Development Group's Debt?
As you can see below, at the end of June 2022, Lecron Industrial Development Group had CN¥198.8m of debt, up from CN¥163.2m a year ago. Click the image for more detail. However, it does have CN¥744.9m in cash offsetting this, leading to net cash of CN¥546.1m.
SZSE:300343 Debt to Equity History August 16th 2022
How Healthy Is Lecron Industrial Development Group's Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Lecron Industrial Development Group had liabilities of CN¥705.1m due within 12 months and liabilities of CN¥81.9m due beyond that. Offsetting these obligations, it had cash of CN¥744.9m as well as receivables valued at CN¥558.6m due within 12 months. So it actually has CN¥516.4m more liquid assets than total liabilities.
This surplus suggests that Lecron Industrial Development Group has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Lecron Industrial Development Group boasts net cash, so it's fair to say it does not have a heavy debt load!
Better yet, Lecron Industrial Development Group grew its EBIT by 1,203% last year, which is an impressive improvement. If maintained that growth will make the debt even more manageable in the years ahead. When analysing debt levels, the balance sheet is the obvious place to start. But it is Lecron Industrial Development Group's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.
Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Lecron Industrial Development Group 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. During the last two years, Lecron Industrial Development Group produced sturdy free cash flow equating to 58% of its EBIT, about what we'd expect. This free cash flow puts the company in a good position to pay down debt, when appropriate.
Summing Up
While we empathize with investors who find debt concerning, you should keep in mind that Lecron Industrial Development Group has net cash of CN¥546.1m, as well as more liquid assets than liabilities. And it impressed us with its EBIT growth of 1,203% over the last year. So is Lecron Industrial Development Group's debt a risk? It doesn't seem so to us. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 2 warning signs for Lecron Industrial Development Group (1 is potentially serious!) that you should be aware of before investing here.
When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.
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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.
傳奇基金經理理想汽車·盧曾説,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。當我們考慮一家公司的風險有多大時,我們總是喜歡看它對債務的使用,因為債務過重可能導致破產。我們注意到樂克龍實業發展集團有限公司。(SZSE:300343)的資產負債表上確實有債務。但真正的問題是,這筆債務是否讓該公司面臨風險。
什麼時候債務是個問題?
當一家企業無法輕鬆履行這些義務時,債務和其他債務就會變得有風險,無論是通過自由現金流還是通過以有吸引力的價格籌集資本。資本主義的一部分是“創造性破壞”的過程,破產的企業被銀行家無情地清算。然而,一種更常見(但仍令人痛苦)的情景是,它不得不以低價籌集新的股本,從而永久性地稀釋股東。然而,通過取代稀釋,對於需要資本投資於高回報率增長的企業來説,債務可以成為一個非常好的工具。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LeCron工業發展集團的最新分析
LeCron工業發展集團的債務是什麼?
如下所示,截至2022年6月底,樂創實業發展集團的債務為1.98億加元,高於一年前的1.632億加元。單擊圖像瞭解更多詳細信息。然而,它確實有7.449億加元的現金來抵消這一點,導致淨現金為5.461億加元。
深圳證交所:300343債轉股歷史2022年8月16日
LeCron工業發展集團的資產負債表有多健康?
放大最新的資產負債表數據可以看到,樂創實業發展集團有7.051億加元的負債在12個月內到期,超過12個月的負債有8190萬加元到期。為了抵消這些債務,該公司有7.449億加元的現金和5.586億加元的應收賬款在12個月內到期。所以它實際上有5.164億元人民幣更多流動資產超過總負債。
這一盈餘表明,LeCron Industrial Development Group擁有保守的資產負債表,很可能會毫不費力地消除債務。簡而言之,LeCron工業發展集團擁有淨現金,所以公平地説,它沒有沉重的債務負擔!
更好的是,LeCron工業發展集團去年的息税前利潤增長了1203%,這是一個令人印象深刻的進步。如果保持這樣的增長,未來幾年的債務將變得更加可控。在分析債務水平時,資產負債表顯然是一個起點。但未來影響資產負債表表現的將是LeCron工業發展集團的盈利情況。因此,當考慮債務時,絕對值得關注收益趨勢。點擊此處查看互動快照。
最後,一家公司只能用冷硬現金償還債務,而不是會計利潤。雖然LeCron工業發展集團的資產負債表上有淨現金,但它將息税前收益(EBIT)轉換為自由現金流的能力仍然值得一看,以幫助我們瞭解它正在以多快的速度建立(或侵蝕)現金餘額。在過去的兩年中,LeCron工業發展集團產生了相當於其息税前利潤58%的強勁自由現金流,這與我們預期的差不多。這種自由現金流使公司在適當的時候處於償還債務的有利地位。
總結
雖然我們同情那些對債務感到擔憂的投資者,但你應該記住,樂高實業發展集團擁有5.461億元人民幣的淨現金,以及比負債更多的流動資產。去年息税前利潤增長了1203%,給我們留下了深刻的印象。那麼,LeCron工業發展集團的債務是一種風險嗎?但在我們看來並非如此。毫無疑問,我們從資產負債表中瞭解到的債務最多。但歸根結底,每家公司都可能包含存在於資產負債表之外的風險。例如,我們發現樂創實業發展集團的2個警告標誌(%1可能很嚴重!)在這裏投資之前你應該意識到這一點。
總而言之,有時候專注於甚至不需要債務的公司會更容易。讀者可以訪問淨債務為零的成長型股票列表100%免費,現在。
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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。