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. Importantly, Getein Biotech, Inc (SHSE:603387) does carry debt. But is this debt a concern to shareholders?
When Is Debt A Problem?
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. 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. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.
View our latest analysis for Getein Biotech
What Is Getein Biotech's Debt?
You can click the graphic below for the historical numbers, but it shows that as of March 2022 Getein Biotech had CN¥568.2m of debt, an increase on CN¥397.3m, over one year. But on the other hand it also has CN¥1.59b in cash, leading to a CN¥1.02b net cash position.
SHSE:603387 Debt to Equity History August 25th 2022
A Look At Getein Biotech's Liabilities
According to the last reported balance sheet, Getein Biotech had liabilities of CN¥1.02b due within 12 months, and liabilities of CN¥45.4m due beyond 12 months. Offsetting these obligations, it had cash of CN¥1.59b as well as receivables valued at CN¥644.8m due within 12 months. So it actually has CN¥1.17b more liquid assets than total liabilities.
This excess liquidity suggests that Getein Biotech is taking a careful approach to debt. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, Getein Biotech boasts net cash, so it's fair to say it does not have a heavy debt load!
In addition to that, we're happy to report that Getein Biotech has boosted its EBIT by 72%, thus reducing the spectre of future debt repayments. There's no doubt that we learn most about debt from the balance sheet. But it is Getein Biotech'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 business needs free cash flow to pay off debt; accounting profits just don't cut it. While Getein Biotech 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. In the last three years, Getein Biotech's free cash flow amounted to 40% of its EBIT, less than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.
Summing Up
While we empathize with investors who find debt concerning, you should keep in mind that Getein Biotech has net cash of CN¥1.02b, as well as more liquid assets than liabilities. And we liked the look of last year's 72% year-on-year EBIT growth. So we don't think Getein Biotech's use of debt is risky. 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. To that end, you should learn about the 2 warning signs we've spotted with Getein Biotech (including 1 which is potentially serious) .
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.
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.
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。因此,當你考慮到任何一隻股票的風險有多大時,你需要考慮債務可能是顯而易見的,因為太多的債務可能會讓一家公司倒閉。重要的是Getein Biotech公司(上海證券交易所:603387)確實揹負着債務。但這筆債務對股東來説是一個擔憂嗎?
什麼時候債務是個問題?
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。在最糟糕的情況下,如果一家公司無法償還債權人的債務,它可能會破產。儘管這並不常見,但我們確實經常看到負債累累的公司永久性地稀釋股東的權益,因為貸款人迫使他們以令人沮喪的價格籌集資金。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。當考慮一家企業使用了多少債務時,首先要做的是把現金和債務放在一起看。
查看我們對Getein Biotech的最新分析
Getein Biotech的債務是什麼?
你可以點擊下圖查看歷史數字,但它顯示,截至2022年3月,Getein Biotech的債務為5.682億元人民幣,比一年前增加了3.973億元人民幣。但另一方面,它也有15.9億元人民幣的現金,導致10.2億元人民幣的淨現金頭寸。
上證綜指:603387債轉股歷史2022年8月25日
看Getein Biotech的負債
根據最新公佈的資產負債表,Getein Biotech有10.2億加元的負債在12個月內到期,4540萬加元的負債在12個月後到期。為了抵消這些債務,該公司有15.9億加元的現金以及價值6.448億加元的應收賬款在12個月內到期。所以它實際上有11.7億元人民幣更多流動資產超過總負債。
這種過剩的流動性表明,Getein Biotech正在謹慎地處理債務問題。由於它擁有充足的資產,它不太可能與其貸款人發生麻煩。簡而言之,Getein Biotech擁有淨現金,所以可以公平地説,它沒有沉重的債務負擔!
除此之外,我們很高興地報告,Getein Biotech已經將其息税前利潤提高了72%,從而減少了未來償還債務的幽靈。毫無疑問,我們從資產負債表中瞭解到的債務最多。但Getein Biotech的收益將影響未來資產負債表的表現。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,企業需要自由現金流來償還債務;會計利潤只是不能削減這一點。雖然Getein Biotech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,以幫助我們瞭解它建立(或侵蝕)現金餘額的速度有多快。在過去的三年裏,Getein Biotech的自由現金流佔其息税前利潤的40%,低於我們的預期。這種疲軟的現金轉換增加了處理債務的難度。
總結
雖然我們同情那些對債務感到擔憂的投資者,但您應該記住,Getein Biotech擁有10.2億元人民幣的淨現金,以及更多的流動資產而不是負債。我們喜歡去年息税前利潤同比增長72%的表現。因此,我們不認為Getein Biotech使用債務是有風險的。毫無疑問,我們從資產負債表中瞭解到的債務最多。然而,並非所有投資風險都存在於資產負債表中--遠非如此。為此,您應該瞭解2個警告標誌我們已經發現了Getein Biotech(包括1個潛在的嚴重問題)。
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。
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。