Does HNA TechnologyLtd (SHSE:600751) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies HNA Technology Co.,Ltd. (SHSE:600751) makes use of 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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, 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.

View our latest analysis for HNA TechnologyLtd

What Is HNA TechnologyLtd's Net Debt?

As you can see below, at the end of September 2024, HNA TechnologyLtd had CN¥328.0m of debt, up from none a year ago. Click the image for more detail. However, it does have CN¥3.77b in cash offsetting this, leading to net cash of CN¥3.44b.

How Healthy Is HNA TechnologyLtd's Balance Sheet?

We can see from the most recent balance sheet that HNA TechnologyLtd had liabilities of CN¥1.64b falling due within a year, and liabilities of CN¥463.2m due beyond that. Offsetting this, it had CN¥3.77b in cash and CN¥496.7m in receivables that were due within 12 months. So it can boast CN¥2.16b more liquid assets than total liabilities.

This surplus strongly suggests that HNA TechnologyLtd has a rock-solid balance sheet (and the debt is of no concern whatsoever). With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, HNA TechnologyLtd boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since HNA TechnologyLtd 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, HNA TechnologyLtd reported revenue of CN¥1.2b, which is a gain of 224%, although it did not report any earnings before interest and tax. That's virtually the hole-in-one of revenue growth!

So How Risky Is HNA TechnologyLtd?

Although HNA TechnologyLtd had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of CN¥65m. So when you consider it has net cash, along with the statutory profit, the stock probably isn't as risky as it might seem, at least in the short term. We think its revenue growth of 224% is a good sign. We'd see further strong growth as an optimistic indication. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example HNA TechnologyLtd has 2 warning signs (and 1 which can't be ignored) we think you should know about.

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.