Is Caissa Tosun DevelopmentLtd (SZSE:000796) Weighed On By Its Debt Load?

Warren Buffett famously said, '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, Caissa Tosun Development Co.,Ltd. (SZSE:000796) does carry debt. But the real question is whether this debt is making the company risky.

Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. When we think about a company's use of debt, we first look at cash and debt together.

Check out our latest analysis for Caissa Tosun DevelopmentLtd

What Is Caissa Tosun DevelopmentLtd's Debt?

As you can see below, Caissa Tosun DevelopmentLtd had CN¥256.1m of debt at March 2024, down from CN¥1.49b a year prior. But it also has CN¥973.1m in cash to offset that, meaning it has CN¥717.0m net cash.

A Look At Caissa Tosun DevelopmentLtd's Liabilities

We can see from the most recent balance sheet that Caissa Tosun DevelopmentLtd had liabilities of CN¥946.0m falling due within a year, and liabilities of CN¥293.7m due beyond that. On the other hand, it had cash of CN¥973.1m and CN¥508.7m worth of receivables due within a year. So it can boast CN¥242.0m more liquid assets than total liabilities.

This surplus suggests that Caissa Tosun DevelopmentLtd has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Caissa Tosun DevelopmentLtd has more cash than debt is arguably a good indication that it can manage its debt safely. 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 Caissa Tosun DevelopmentLtd 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.

Over 12 months, Caissa Tosun DevelopmentLtd reported revenue of CN¥666m, which is a gain of 142%, although it did not report any earnings before interest and tax. So its pretty obvious shareholders are hoping for more growth!

So How Risky Is Caissa Tosun DevelopmentLtd?

Although Caissa Tosun DevelopmentLtd had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of CN¥636m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. We think its revenue growth of 142% is a good sign. There's no doubt fast top line growth can cure all manner of ills, for a stock. 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. Case in point: We've spotted 3 warning signs for Caissa Tosun DevelopmentLtd 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.

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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.

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