Is Breton Technology (HKG:1333) A Risky Investment?

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 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. Importantly, Breton Technology Co., Ltd. (HKG:1333) does carry debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own 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, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Breton Technology's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Breton Technology had debt of CN¥463.8m, up from CN¥153.2m in one year. On the flip side, it has CN¥373.9m in cash leading to net debt of about CN¥89.9m.

How Strong Is Breton Technology's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Breton Technology had liabilities of CN¥618.8m due within 12 months and liabilities of CN¥276.8m due beyond that. Offsetting these obligations, it had cash of CN¥373.9m as well as receivables valued at CN¥434.2m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by CN¥87.6m.

Having regard to Breton Technology's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the CN¥6.84b company is short on cash, but still worth keeping an eye on the balance sheet. Carrying virtually no net debt, Breton Technology has a very light debt load indeed. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Breton Technology 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.

See our latest analysis for Breton Technology

Over 12 months, Breton Technology reported revenue of CN¥695m, which is a gain of 27%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Even though Breton Technology managed to grow its top line quite deftly, the cold hard truth is that it is losing money on the EBIT line. To be specific the EBIT loss came in at CN¥295m. 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. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled CN¥379m in negative free cash flow over the last twelve months. So in short it's a really risky 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. For instance, we've identified 2 warning signs for Breton Technology (1 is potentially serious) 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.