David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Longshine Technology Group Co., Ltd. (SZSE:300682) does use debt in its business. But the real question is whether this debt is making the company risky.
When Is Debt Dangerous?
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. 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.
View our latest analysis for Longshine Technology Group
How Much Debt Does Longshine Technology Group Carry?
As you can see below, at the end of March 2022, Longshine Technology Group had CN¥818.9m of debt, up from CN¥720.1m a year ago. Click the image for more detail. However, it does have CN¥1.55b in cash offsetting this, leading to net cash of CN¥727.7m.
SZSE:300682 Debt to Equity History August 9th 2022
How Strong Is Longshine Technology Group's Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Longshine Technology Group had liabilities of CN¥1.38b due within 12 months and liabilities of CN¥738.0m due beyond that. Offsetting these obligations, it had cash of CN¥1.55b as well as receivables valued at CN¥3.81b due within 12 months. So it actually has CN¥3.24b more liquid assets than total liabilities.
This short term liquidity is a sign that Longshine Technology Group could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Longshine Technology Group boasts net cash, so it's fair to say it does not have a heavy debt load!
Also good is that Longshine Technology Group grew its EBIT at 14% over the last year, further increasing its ability to manage debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Longshine Technology Group can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Longshine Technology Group may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last three years, Longshine Technology Group reported free cash flow worth 15% of its EBIT, which is really quite low. 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 Longshine Technology Group has CN¥727.7m in net cash and a decent-looking balance sheet. On top of that, it increased its EBIT by 14% in the last twelve months. So we don't have any problem with Longshine Technology Group's use of debt. 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. For example Longshine Technology Group has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
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.
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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.
大卫·伊本说得很好,波动性不是我们关心的风险,我们关心的是避免资本的永久性损失。当你考察一家公司的风险有多大时,考虑它的资产负债表是很自然的,因为当一家企业倒闭时,债务往往会涉及到它。我们可以看到龙山科技集团有限公司。(SZSE:300682)确实在其业务中使用债务。但真正的问题是,这笔债务是否让该公司面临风险。
债务在什么时候是危险的?
当一家企业无法轻松履行这些义务时,债务和其他债务就会变得有风险,无论是通过自由现金流还是通过以有吸引力的价格筹集资本。在最糟糕的情况下,如果一家公司无法偿还债权人的债务,它可能会破产。然而,一种更常见(但仍令人痛苦)的情景是,它不得不以低价筹集新的股本,从而永久性地稀释股东。话虽如此,最常见的情况是一家公司对债务管理得相当好--并对自己有利。当考虑一家企业使用了多少债务时,首先要做的是把现金和债务放在一起看。
查看我们对龙光科技集团的最新分析
龙山科技集团背负着多少债务?
如下所示,截至2022年3月底,龙光科技集团的债务为8.189亿加元,高于一年前的7.201亿加元。单击图像了解更多详细信息。然而,它确实有15.5亿加元的现金抵消了这一点,导致净现金为7.277亿加元。
深交所:300682债转股历史2022年8月9日
朗盛科技集团的资产负债表有多强劲?
放大最新的资产负债表数据,我们可以看到,龙光科技集团有13.8亿元人民币的负债在12个月内到期,还有7.38亿元人民币的负债在12个月内到期。作为对这些债务的抵消,该公司有15.5亿加元的现金以及价值38.1亿加元的应收账款在12个月内到期。所以它实际上有32.4亿元人民币更多流动资产超过总负债。
这种短期流动性是一个迹象,表明龙山科技集团可能可以轻松偿还债务,因为该集团的资产负债表远未捉襟见肘。简而言之,龙光科技集团拥有净现金,因此可以说它没有沉重的债务负担!
另一个好消息是,龙山科技集团去年息税前利润增长了14%,进一步增强了其管理债务的能力。毫无疑问,我们从资产负债表中了解到的债务最多。但最终,该业务未来的盈利能力将决定龙光科技集团能否随着时间的推移加强其资产负债表。所以,如果你关注未来,你可以看看这个免费显示分析师利润预测的报告。
最后,尽管税务人员可能喜欢会计利润,但贷款人只接受冷硬现金。朗晖科技集团的资产负债表上可能有净现金,但看看该业务将息税前收益(EBIT)转换为自由现金流的情况仍很有趣,因为这将影响其对债务的需求和管理债务的能力。在过去的三年里,朗盛科技集团报告的自由现金流相当于其息税前利润的15%,这确实是相当低的。这种疲软的现金转换水平削弱了它管理和偿还债务的能力。
总结
尽管调查一家公司的债务总是明智的,但在这起案件中,龙山科技集团拥有7.277亿元人民币的净现金和看起来不错的资产负债表。最重要的是,它在过去12个月中息税前利润增长了14%。因此,我们对朗盛科技集团的债务使用没有任何问题。在分析债务水平时,资产负债表显然是一个起点。但归根结底,每家公司都可能包含存在于资产负债表之外的风险。例如,龙光科技集团拥有2个警告标志(这让我们有点不舒服)我们认为你应该知道这一点。
当然,如果你是那种喜欢在没有债务负担的情况下购买股票的投资者,那么不要犹豫,今天就来看看我们的净现金成长型股票独家名单。
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本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。