Does Jushri Technologies (SZSE:300762) Have A Healthy Balance Sheet?

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. We note that Jushri Technologies, INC. (SZSE:300762) does have debt on its balance sheet. But is this debt a concern to shareholders?

Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. 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. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for Jushri Technologies

What Is Jushri Technologies's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2023 Jushri Technologies had CN¥425.5m of debt, an increase on CN¥131.5m, over one year. However, it does have CN¥1.36b in cash offsetting this, leading to net cash of CN¥937.4m.

How Strong Is Jushri Technologies' Balance Sheet?

The latest balance sheet data shows that Jushri Technologies had liabilities of CN¥813.8m due within a year, and liabilities of CN¥45.3m falling due after that. On the other hand, it had cash of CN¥1.36b and CN¥1.10b worth of receivables due within a year. So it can boast CN¥1.60b more liquid assets than total liabilities.

It's good to see that Jushri Technologies has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, Jushri Technologies boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Jushri Technologies'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 Jushri Technologies had a loss before interest and tax, and actually shrunk its revenue by 69%, to CN¥230m. To be frank that doesn't bode well.

So How Risky Is Jushri Technologies?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that Jushri Technologies had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through CN¥295m of cash and made a loss of CN¥67m. With only CN¥937.4m on the balance sheet, it would appear that its going to need to raise capital again soon. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. When analysing debt levels, the balance sheet is the obvious place to start. 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 Jushri Technologies you should know about.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.