Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. Importantly, Jiang Su Suyan Jingshen Co.,Ltd (SHSE:603299) does carry debt. But is this debt a concern to shareholders?
Why Does Debt Bring Risk?
Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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 step when considering a company's debt levels is to consider its cash and debt together.
View our latest analysis for Jiang Su Suyan JingshenLtd
What Is Jiang Su Suyan JingshenLtd's Net Debt?
You can click the graphic below for the historical numbers, but it shows that as of September 2022 Jiang Su Suyan JingshenLtd had CN¥2.52b of debt, an increase on CN¥1.55b, over one year. But it also has CN¥3.38b in cash to offset that, meaning it has CN¥863.3m net cash.
SHSE:603299 Debt to Equity History December 6th 2022
A Look At Jiang Su Suyan JingshenLtd's Liabilities
Zooming in on the latest balance sheet data, we can see that Jiang Su Suyan JingshenLtd had liabilities of CN¥3.83b due within 12 months and liabilities of CN¥1.17b due beyond that. Offsetting these obligations, it had cash of CN¥3.38b as well as receivables valued at CN¥1.37b due within 12 months. So its liabilities total CN¥248.8m more than the combination of its cash and short-term receivables.
Since publicly traded Jiang Su Suyan JingshenLtd shares are worth a total of CN¥8.84b, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Jiang Su Suyan JingshenLtd boasts net cash, so it's fair to say it does not have a heavy debt load!
Better yet, Jiang Su Suyan JingshenLtd grew its EBIT by 342% last year, which is an impressive improvement. That boost will make it even easier to pay down debt going forward. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Jiang Su Suyan JingshenLtd will need earnings to service that debt. 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 Jiang Su Suyan JingshenLtd 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. Happily for any shareholders, Jiang Su Suyan JingshenLtd actually produced more free cash flow than EBIT over the last three years. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.
Summing Up
While it is always sensible to look at a company's total liabilities, it is very reassuring that Jiang Su Suyan JingshenLtd has CN¥863.3m in net cash. The cherry on top was that in converted 106% of that EBIT to free cash flow, bringing in CN¥747m. So we don't think Jiang Su Suyan JingshenLtd's use of debt is risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that Jiang Su Suyan JingshenLtd is showing 1 warning sign in our investment analysis , you should know about...
At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.
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.
馬克斯説得很好,他不是擔心股價波動,而是我擔心的是永久虧損的可能性……我認識的每個實際投資者都擔心。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。重要的是江蘇蘇州燕京深有限公司(上海證券交易所:603299)確實揹負着債務。但這筆債務對股東來説是一個擔憂嗎?
為什麼債務會帶來風險?
一般來説,只有當一家公司無法輕鬆償還債務時,債務才會成為一個真正的問題,無論是通過籌集資金還是用自己的現金流。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。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。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。
查看我們對江蘇蘇煙精深有限公司的最新分析
江蘇素燕精深股份有限公司的淨債務是多少?
你可以點擊下圖查看歷史數據,但它顯示,截至2022年9月,江蘇蘇煙精深有限公司的債務為25.2億元,比一年前增加了15.5億元。但它也有33.8億加元的現金來抵消,這意味着它有8.633億加元的淨現金。
上證綜指:603299債轉股歷史2022年12月6日
江蘇蘇煙精深股份有限公司負債情況一瞥
放大最新的資產負債表數據,我們可以看到,江蘇蘇巖精深有限公司有38.3億元的負債在12個月內到期,11.7億元的負債在12個月內到期。作為對這些債務的抵銷,該公司有33.8億加元的現金以及13.7億加元的應收賬款在12個月內到期。因此,其負債總額為2.488億加元,比現金和短期應收賬款的總和還要多。
由於上市的江蘇蘇煙精深股份有限公司股票總價值88.4億元人民幣,這樣的負債水平似乎不太可能構成重大威脅。然而,我們確實認為值得關注其資產負債表的實力,因為它可能會隨着時間的推移而變化。儘管有值得注意的負債,但江蘇蘇燕精深有限公司擁有淨現金,因此可以説它沒有沉重的債務負擔!
更好的是,江蘇蘇煙精深股份有限公司去年息税前利潤增長了342%,這是一個令人印象深刻的進步。這一提振將使未來償還債務變得更加容易。在分析債務水平時,資產負債表顯然是一個起點。但你不能完全孤立地看待債務;因為江蘇素燕精深股份有限公司需要盈利來償還債務。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。雖然江蘇蘇燕精深有限公司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。對於任何股東來説,令人高興的是,在過去的三年裏,江蘇蘇巖精深有限公司實際上產生了比息税前利潤更多的自由現金流。説到贏得貸款人的好感,沒有什麼比收到的現金更好的了。
總結
雖然看一家公司的總負債總是明智的,但令人欣慰的是,江蘇素燕精深有限公司擁有8.633億元人民幣的淨現金。上面的櫻桃是IN將其中106%的EBIT轉換為自由現金流,帶來7.47億元人民幣的收入。因此,我們不認為江蘇蘇煙精深股份有限公司使用債務是有風險的。在分析債務水平時,資產負債表顯然是一個起點。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。請注意,江蘇蘇燕精深有限公司正在展示在我們的投資分析中出現1個警告信號,你應該知道關於……
歸根結底,關注那些沒有淨債務的公司往往更好。你可以訪問我們的這類公司的特別名單(都有利潤增長的記錄)。這是免費的。
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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。