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 Haier Smart Home Co., Ltd. (SHSE:600690) does have debt on its balance sheet. But is this debt a concern to shareholders?
What Risk Does Debt Bring?
Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
Check out our latest analysis for Haier Smart Home
How Much Debt Does Haier Smart Home Carry?
The image below, which you can click on for greater detail, shows that at June 2022 Haier Smart Home had debt of CN¥24.8b, up from CN¥23.6b in one year. However, it does have CN¥54.4b in cash offsetting this, leading to net cash of CN¥29.6b.
SHSE:600690 Debt to Equity History September 21st 2022
How Strong Is Haier Smart Home's Balance Sheet?
We can see from the most recent balance sheet that Haier Smart Home had liabilities of CN¥127.7b falling due within a year, and liabilities of CN¥11.4b due beyond that. On the other hand, it had cash of CN¥54.4b and CN¥29.1b worth of receivables due within a year. So it has liabilities totalling CN¥55.5b more than its cash and near-term receivables, combined.
Haier Smart Home has a very large market capitalization of CN¥225.9b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. Despite its noteworthy liabilities, Haier Smart Home boasts net cash, so it's fair to say it does not have a heavy debt load!
Haier Smart Home's EBIT was pretty flat over the last year, but that shouldn't be an issue given the it doesn't have a lot of debt. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Haier Smart Home'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 Haier Smart Home 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, Haier Smart Home's free cash flow amounted to 26% of its EBIT, less than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.
Summing Up
While Haier Smart Home does have more liabilities than liquid assets, it also has net cash of CN¥29.6b. So we don't have any problem with Haier Smart Home's use of debt. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 2 warning signs for Haier Smart Home you should be aware of, and 1 of them is significant.
Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.
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。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。我們注意到海爾智家股份有限公司。(上交所:600690)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?
債務幫助企業,直到企業難以償還債務,無論是用新資本還是用自由現金流。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。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。話雖如此,最常見的情況是一家公司對債務管理得相當好--並對自己有利。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。
看看我們對海爾智家的最新分析
海爾智家揹負着多少債務?
下面的圖片,你可以點擊查看更多詳細信息,顯示在2022年6月,海爾智家的債務為248億加元,而一年的債務為236億加元。然而,它確實有544億加元的現金來抵消這一點,導致淨現金296億加元。
上證綜指:600690債轉股歷史2022年9月21日
海爾智家的資產負債表有多強?
從最近的資產負債表可以看出,海爾智家有1277億元人民幣的負債在一年內到期,還有114億元人民幣的負債在一年內到期。另一方面,一年內有544億加元現金和291億加元應收賬款到期。因此,該公司的負債總額為人民幣555億元,比現金和近期應收賬款加起來還要多。
海爾智家的市值非常大,達2259億元,因此如果有需要,它很可能會籌集現金來改善其資產負債表。但很明顯,我們絕對應該仔細檢查它是否能夠在不稀釋的情況下管理債務。儘管海爾智家的負債值得注意,但它擁有淨現金,所以公平地説,它沒有沉重的債務負擔!
海爾智家去年的息税前利潤相當持平,但考慮到它沒有太多債務,這應該不是一個問題。毫無疑問,我們從資產負債表中瞭解到的債務最多。但最重要的是,未來的收益將決定海爾智家未來能否保持健康的資產負債表。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。雖然海爾智家的資產負債表上有淨現金,但它將息税前利潤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。在過去三年中,海爾智家的自由現金流佔其息税前利潤的26%,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
雖然海爾智家的負債確實多於流動資產,但它也擁有296億元的淨現金。所以我們對海爾智家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。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。一個恰當的例子:我們發現了海爾智家的2個警示標誌你應該意識到,其中1個是重要的。
當然,如果你是那種喜歡在沒有債務負擔的情況下購買股票的投資者,那麼不要猶豫,今天就來看看我們的淨現金成長型股票獨家名單。
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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。