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

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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, Anshan Senyuan Road and Bridge Co., Ltd (SZSE:300210) does carry debt. But the real question is whether this debt is making the company risky.

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. 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.

Check out our latest analysis for Anshan Senyuan Road and Bridge

What Is Anshan Senyuan Road and Bridge's Debt?

The image below, which you can click on for greater detail, shows that at September 2023 Anshan Senyuan Road and Bridge had debt of CN¥371.6m, up from CN¥319.3m in one year. However, it also had CN¥14.0m in cash, and so its net debt is CN¥357.6m.

How Strong 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¥471.7m due within 12 months and liabilities of CN¥67.9m due beyond that. Offsetting this, it had CN¥14.0m in cash and CN¥223.0m in receivables that were due within 12 months. So it has liabilities totalling CN¥302.7m more than its cash and near-term receivables, combined.

Since publicly traded Anshan Senyuan Road and Bridge shares are worth a total of CN¥5.65b, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Anshan Senyuan Road and Bridge will need earnings to service that debt. 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.

Over 12 months, Anshan Senyuan Road and Bridge made a loss at the EBIT level, and saw its revenue drop to CN¥173m, which is a fall of 18%. We would much prefer see growth.

Caveat Emptor

Not only did Anshan Senyuan Road and Bridge's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). To be specific the EBIT loss came in at CN¥99m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled CN¥13m in negative free cash flow over the last twelve months. So to be blunt we think it is risky. There's no doubt that we learn most about debt from the balance sheet. 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 Anshan Senyuan Road and Bridge .

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.