Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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 can see that Shanghai Huace Navigation Technology Ltd (SZSE:300627) does use debt in its business. But should shareholders be worried about its use of debt?
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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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. When we examine debt levels, we first consider both cash and debt levels, together.
See our latest analysis for Shanghai Huace Navigation Technology
How Much Debt Does Shanghai Huace Navigation Technology Carry?
You can click the graphic below for the historical numbers, but it shows that as of June 2022 Shanghai Huace Navigation Technology had CN¥236.7m of debt, an increase on CN¥190.4m, over one year. But it also has CN¥993.0m in cash to offset that, meaning it has CN¥756.2m net cash.
SZSE:300627 Debt to Equity History September 1st 2022
A Look At Shanghai Huace Navigation Technology's Liabilities
The latest balance sheet data shows that Shanghai Huace Navigation Technology had liabilities of CN¥1.04b due within a year, and liabilities of CN¥109.9m falling due after that. On the other hand, it had cash of CN¥993.0m and CN¥844.0m worth of receivables due within a year. So it can boast CN¥690.0m more liquid assets than total liabilities.
This surplus suggests that Shanghai Huace Navigation Technology has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Shanghai Huace Navigation Technology has more cash than debt is arguably a good indication that it can manage its debt safely.
It is just as well that Shanghai Huace Navigation Technology's load is not too heavy, because its EBIT was down 26% 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 it is future earnings, more than anything, that will determine Shanghai Huace Navigation Technology's ability to maintain a healthy balance sheet going forward. 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. While Shanghai Huace Navigation Technology 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, Shanghai Huace Navigation Technology created free cash flow amounting to 4.7% of its EBIT, an uninspiring performance. That limp level of cash conversion undermines its ability to manage and pay down debt.
Summing Up
While it is always sensible to investigate a company's debt, in this case Shanghai Huace Navigation Technology has CN¥756.2m in net cash and a decent-looking balance sheet. So we don't have any problem with Shanghai Huace Navigation Technology's use of debt. 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. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Shanghai Huace Navigation Technology (of which 1 is a bit unpleasant!) you should know about.
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.
一些人説,作為投資者,考慮風險的最佳方式是波動性,而不是債務,但巴菲特曾説過一句名言:波動性遠非風險的同義詞。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。我們可以看到上海華思導航科技有限公司(SZSE:300627)確實在其業務中使用債務。但股東是否應該擔心它的債務使用情況?
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,一種更常見(但仍然昂貴)的情況是,一家公司必須以低廉的股價稀釋股東的股份,才能控制債務。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。當我們檢查債務水平時,我們首先同時考慮現金和債務水平。
查看我們對上海華思導航科技的最新分析
上海華策導航科技揹負着多少債務?
你可以點擊下圖查看歷史數字,但它顯示,截至2022年6月,上海華策導航科技的債務為2.367億元人民幣,比一年前增加了1.904億元人民幣。但它也有9.93億加元的現金來抵消,這意味着它有7.562億加元的淨現金。
深交所:300627債轉股歷史2022年9月1日
上海華策導航科技的負債情況一瞥
最新的資產負債表數據顯示,上海華策導航科技有10.4億元人民幣的負債在一年內到期,1.099億元的負債在一年內到期。另一方面,它有9.93億加元的現金和8.44億加元的應收賬款在一年內到期。因此,它的流動資產比總計負債。
這一盈餘表明,上海華策導航科技擁有保守的資產負債表,很可能不會有太大困難地消除債務。簡而言之,上海華思導航科技的現金多於債務,可以説是一個很好的跡象,表明該公司能夠安全地管理債務。
幸好上海華思導航科技的負擔不是太重,因為它的息税前利潤比去年下降了26%。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。但最重要的是,未來的收益將決定上海華策導航科技未來保持健康資產負債表的能力。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。雖然上海華策導航科技的資產負債表上有淨現金,但它將息税前利潤(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。在過去的三年裏,上海華思導航科技創造了相當於息税前利潤4.7%的自由現金流,這是一個平淡無奇的表現。這種疲軟的現金轉換水平削弱了它管理和償還債務的能力。
總結
儘管調查一家公司的債務總是明智的,但在這起案件中,上海華策導航科技擁有7.562億元人民幣的淨現金和體面的資產負債表。因此,我們對上海華策導航科技的舉債沒有任何問題。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。這些風險可能很難發現。每家公司都有它們,我們已經發現上海華思導航科技的三個警示標誌(其中1個有點不愉快!)你應該知道。
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。
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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。