Anshan Senyuan Road and Bridge (SZSE:300210) Is Carrying A Fair Bit Of Debt

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Anshan Senyuan Road and Bridge Co., Ltd (SZSE:300210) does use debt in its business. But should shareholders be worried about its use of debt?

What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for Anshan Senyuan Road and Bridge

How Much Debt Does Anshan Senyuan Road and Bridge Carry?

As you can see below, Anshan Senyuan Road and Bridge had CN¥362.8m of debt, at September 2024, which is about the same as the year before. You can click the chart for greater detail. On the flip side, it has CN¥28.0m in cash leading to net debt of about CN¥334.8m.

How Healthy Is Anshan Senyuan Road and Bridge's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Anshan Senyuan Road and Bridge had liabilities of CN¥465.4m due within 12 months and liabilities of CN¥67.9m due beyond that. Offsetting these obligations, it had cash of CN¥28.0m as well as receivables valued at CN¥145.1m due within 12 months. So its liabilities total CN¥360.2m more than the combination of its cash and short-term receivables.

Of course, Anshan Senyuan Road and Bridge has a market capitalization of CN¥5.07b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. When analysing debt levels, the balance sheet is the obvious place to start. But it is Anshan Senyuan Road and Bridge's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

In the last year Anshan Senyuan Road and Bridge wasn't profitable at an EBIT level, but managed to grow its revenue by 2.0%, to CN¥176m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Importantly, Anshan Senyuan Road and Bridge had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at CN¥103m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. For example, we would not want to see a repeat of last year's loss of CN¥117m. So we do think this stock is quite risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Anshan Senyuan Road and Bridge you should know about.

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.

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.