Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Shenzhen Hepalink Pharmaceutical Group Co., Ltd. (SZSE:002399) does use debt in its business. But the more important question is: how much risk is that debt creating?
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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.
See our latest analysis for Shenzhen Hepalink Pharmaceutical Group
How Much Debt Does Shenzhen Hepalink Pharmaceutical Group Carry?
The image below, which you can click on for greater detail, shows that at March 2022 Shenzhen Hepalink Pharmaceutical Group had debt of CN¥6.24b, up from CN¥5.71b in one year. On the flip side, it has CN¥4.46b in cash leading to net debt of about CN¥1.78b.
SZSE:002399 Debt to Equity History August 20th 2022
How Strong Is Shenzhen Hepalink Pharmaceutical Group's Balance Sheet?
The latest balance sheet data shows that Shenzhen Hepalink Pharmaceutical Group had liabilities of CN¥5.73b due within a year, and liabilities of CN¥2.64b falling due after that. Offsetting this, it had CN¥4.46b in cash and CN¥1.90b in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by CN¥2.01b.
Since publicly traded Shenzhen Hepalink Pharmaceutical Group shares are worth a total of CN¥20.1b, 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.
We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.
While Shenzhen Hepalink Pharmaceutical Group's low debt to EBITDA ratio of 1.5 suggests only modest use of debt, the fact that EBIT only covered the interest expense by 5.4 times last year does give us pause. So we'd recommend keeping a close eye on the impact financing costs are having on the business. If Shenzhen Hepalink Pharmaceutical Group can keep growing EBIT at last year's rate of 11% over the last year, then it will find its debt load easier to manage. 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 Shenzhen Hepalink Pharmaceutical Group can strengthen its balance sheet over time. 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. So we always check how much of that EBIT is translated into free cash flow. Over the last three years, Shenzhen Hepalink Pharmaceutical Group saw substantial negative free cash flow, in total. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.
Our View
Shenzhen Hepalink Pharmaceutical Group's conversion of EBIT to free cash flow was a real negative on this analysis, although the other factors we considered cast it in a significantly better light. But on the bright side, its ability to to grow its EBIT isn't too shabby at all. Looking at all the angles mentioned above, it does seem to us that Shenzhen Hepalink Pharmaceutical Group is a somewhat risky investment as a result of its debt. That's not necessarily a bad thing, since leverage can boost returns on equity, but it is something to be aware of. 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. For example - Shenzhen Hepalink Pharmaceutical Group has 2 warning signs we think you should be aware of.
If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
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.
巴菲特(Warren Buffett)曾说过一句名言:波动性远非风险的代名词。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。我们可以看到深圳市海普力克药业集团有限公司。(SZSE:002399)确实在其业务中使用债务。但更重要的问题是:这笔债务造成了多大的风险?
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。资本主义的一部分是“创造性破坏”的过程,破产的企业被银行家无情地清算。尽管这并不常见,但我们确实经常看到负债累累的公司永久性地稀释股东的权益,因为贷款人迫使他们以令人沮丧的价格筹集资金。当然,在企业中,债务可以是一个重要的工具,特别是资本密集型企业。当我们考虑一家公司的债务用途时,我们首先会把现金和债务放在一起看。
查看我们对深圳海普林药业集团的最新分析
深圳海普林药业集团背负着多少债务?
下面的图片,你可以点击查看更多详细信息,显示截至2022年3月,深圳海普林药业集团的债务为62.4亿加元,高于一年内的57.1亿加元。另一方面,它拥有人民币44.6亿元的现金,导致净债务约为人民币17.8亿元。
深圳证交所:002399债转股历史2022年8月20日
深圳海普林药业集团的资产负债表有多强?
最新的资产负债表数据显示,深圳海普林药业集团一年内到期负债57.3亿元,一年内到期负债26.4亿元。作为抵消,它有44.6亿加元的现金和19.0亿加元的应收账款在12个月内到期。因此,它的负债比现金和(近期)应收账款之和高出20.1亿元。
由于上市的深圳海普林药业集团的股票总价值为人民币201亿元,这种负债水平似乎不太可能构成重大威胁。然而,我们确实认为值得关注其资产负债表的实力,因为它可能会随着时间的推移而变化。
我们使用两个主要比率来告知我们债务相对于收益的水平。第一个是净债务除以利息、税项、折旧和摊销前收益(EBITDA),第二个是其息税前收益(EBIT)覆盖其利息支出(或简称利息覆盖)的多少倍。这样,我们既考虑了债务的绝对量,也考虑了为其支付的利率。
尽管深圳海普瑞药业集团的债务与EBITDA之比只有1.5,这表明它只是适度使用债务,但去年EBIT仅覆盖了5.4倍的利息支出,这一事实确实让我们感到犹豫。因此,我们建议密切关注融资成本对业务的影响。如果深圳海普林药业集团能够保持去年11%的息税前利润增长速度,那么它的债务负担将更容易管理。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深圳海普瑞药业集团能否随着时间的推移加强其资产负债表。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。因此,我们总是检查EBIT中有多少转化为自由现金流。在过去的三年里,深圳海普林药业集团的自由现金流总体上出现了大幅负增长。尽管投资者无疑预计这种情况会在适当的时候逆转,但这显然意味着它使用债务的风险更大。
我们的观点
深圳海普林药业集团将息税前利润转换为自由现金流对这一分析是一个真正的负面影响,尽管我们考虑的其他因素对其影响要好得多。但从好的方面来看,它增长息税前利润的能力一点也不差。综上所述,在我们看来,深圳海普林药业集团由于其债务,确实是一项有一定风险的投资。这不一定是一件坏事,因为杠杆可以提高股本回报率,但这是需要注意的。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。例如-深圳海普林药业集团2个警告标志我们认为你应该意识到。
如果你对一家增长迅速、资产负债表坚如磐石的公司更感兴趣,那么请立即查看我们的净现金成长型股票清单。
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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。