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.
一些人说,作为投资者,考虑风险的最佳方式是波动性,而不是债务,但巴菲特曾说过一句名言:波动性远非风险的同义词。当我们考虑一家公司的风险有多大时,我们总是喜欢看它对债务的使用,因为债务过重可能导致破产。我们可以看到上海华思导航科技有限公司(SZSE:300627)确实在其业务中使用债务。但股东是否应该担心它的债务使用情况?
债务会带来什么风险?
债务是帮助企业发展的一种工具,但如果一家企业无法偿还贷款人的债务,那么它就只能听从贷款人的摆布。最终,如果公司不能履行其偿还债务的法定义务,股东可能会一无所有地离开。然而,一种更常见(但仍然昂贵)的情况是,一家公司必须以低廉的股价稀释股东的股份,才能控制债务。然而,通过取代稀释,对于需要资本投资于高回报率增长的企业来说,债务可以成为一个非常好的工具。当我们检查债务水平时,我们首先同时考虑现金和债务水平。
查看我们对上海华思导航科技的最新分析
上海华策导航科技背负着多少债务?
你可以点击下图查看历史数字,但它显示,截至2022年6月,上海华策导航科技的债务为2.367亿元人民币,比一年前增加了1.904亿元人民币。但它也有9.93亿加元的现金来抵消,这意味着它有7.562亿加元的净现金。
深交所:300627债转股历史2022年9月1日
上海华策导航科技的负债情况一瞥
最新的资产负债表数据显示,上海华策导航科技有10.4亿元人民币的负债在一年内到期,1.099亿元的负债在一年内到期。另一方面,它有9.93亿加元的现金和8.44亿加元的应收账款在一年内到期。因此,它的流动资产比总计负债。
这一盈余表明,上海华策导航科技拥有保守的资产负债表,很可能不会有太大困难地消除债务。简而言之,上海华思导航科技的现金多于债务,可以说是一个很好的迹象,表明该公司能够安全地管理债务。
幸好上海华思导航科技的负担不是太重,因为它的息税前利润比去年下降了26%。说到还债,收入下降并不比含糖汽水对你的健康有什么用处。当你分析债务时,资产负债表显然是你关注的领域。但最重要的是,未来的收益将决定上海华策导航科技未来保持健康资产负债表的能力。因此,如果你想看看专业人士的想法,你可能会发现这份关于分析师利润预测的免费报告很有趣。
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。虽然上海华策导航科技的资产负债表上有净现金,但它将息税前利润(EBIT)转换为自由现金流的能力仍然值得一看,以帮助我们了解它正在以多快的速度建立(或侵蚀)现金余额。在过去的三年里,上海华思导航科技创造了相当于息税前利润4.7%的自由现金流,这是一个平淡无奇的表现。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,上海华策导航科技拥有7.562亿元人民币的净现金和体面的资产负债表。因此,我们对上海华策导航科技的举债没有任何问题。当你分析债务时,资产负债表显然是你关注的领域。然而,并非所有投资风险都存在于资产负债表中--远非如此。这些风险可能很难发现。每家公司都有它们,我们已经发现上海华思导航科技的三个警示标志(其中1个有点不愉快!)你应该知道。
如果你有兴趣投资于可以在没有债务负担的情况下增长利润的企业,那么看看这个免费资产负债表上有净现金的成长型企业名单。
对这篇文章有什么反馈吗?担心内容吗? 保持联系直接与我们联系。或者,也可以给编辑组发电子邮件,地址是implywallst.com。
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。