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Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, Intron Technology Holdings Limited (HKG:1760) does carry debt. But the more important question is: how much risk is that debt creating?
Why Does Debt Bring Risk?
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.
Check out our latest analysis for Intron Technology Holdings
How Much Debt Does Intron Technology Holdings Carry?
As you can see below, at the end of December 2018, Intron Technology Holdings had CN¥374.2m of debt, up from CN¥172.0m a year ago. Click the image for more detail. But on the other hand it also has CN¥655.1m in cash, leading to a CN¥281.0m net cash position.
How Healthy Is Intron Technology Holdings's Balance Sheet?
We can see from the most recent balance sheet that Intron Technology Holdings had liabilities of CN¥827.5m falling due within a year, and liabilities of CN¥2.41m due beyond that. Offsetting this, it had CN¥655.1m in cash and CN¥725.9m in receivables that were due within 12 months. So it can boast CN¥551.1m more liquid assets than total liabilities.
This surplus suggests that Intron Technology Holdings is using debt in a way that is appears to be both safe and conservative. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Succinctly put, Intron Technology Holdings boasts net cash, so it's fair to say it does not have a heavy debt load!
On top of that, Intron Technology Holdings grew its EBIT by 48% over the last twelve months, and that growth will make it easier to handle its debt. 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 Intron Technology Holdings's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.