Is Siasun Robot&AutomationLtd (SZSE:300024) A Risky Investment?

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. Importantly, Siasun Robot&Automation Co.,Ltd. (SZSE:300024) does carry debt. But is this debt a concern to shareholders?

When Is Debt A Problem?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

See our latest analysis for Siasun Robot&AutomationLtd

How Much Debt Does Siasun Robot&AutomationLtd Carry?

As you can see below, Siasun Robot&AutomationLtd had CN¥2.33b of debt, at September 2024, which is about the same as the year before. You can click the chart for greater detail. However, it also had CN¥2.16b in cash, and so its net debt is CN¥174.6m.

How Healthy Is Siasun Robot&AutomationLtd's Balance Sheet?

We can see from the most recent balance sheet that Siasun Robot&AutomationLtd had liabilities of CN¥6.23b falling due within a year, and liabilities of CN¥1.08b due beyond that. Offsetting these obligations, it had cash of CN¥2.16b as well as receivables valued at CN¥2.06b due within 12 months. So its liabilities total CN¥3.09b more than the combination of its cash and short-term receivables.

Since publicly traded Siasun Robot&AutomationLtd shares are worth a total of CN¥30.5b, 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. But either way, Siasun Robot&AutomationLtd has virtually no net debt, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Siasun Robot&AutomationLtd'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.

In the last year Siasun Robot&AutomationLtd had a loss before interest and tax, and actually shrunk its revenue by 4.6%, to CN¥4.0b. We would much prefer see growth.

Caveat Emptor

Over the last twelve months Siasun Robot&AutomationLtd produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at CN¥150m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through CN¥111m of cash over the last year. So suffice it to say we do consider the stock to be risky. 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. To that end, you should be aware of the 3 warning signs we've spotted with Siasun Robot&AutomationLtd .

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.