Does Beijing UBOX Online Technology (HKG:2429) Have A Healthy Balance Sheet?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. We can see that Beijing UBOX Online Technology Corp. (HKG:2429) does use debt in its business. But the more important question is: how much risk is that debt creating?

When Is Debt Dangerous?

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. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for Beijing UBOX Online Technology

What Is Beijing UBOX Online Technology's Debt?

The chart below, which you can click on for greater detail, shows that Beijing UBOX Online Technology had CN¥91.5m in debt in June 2024; about the same as the year before. However, its balance sheet shows it holds CN¥424.8m in cash, so it actually has CN¥333.3m net cash.

How Healthy Is Beijing UBOX Online Technology's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Beijing UBOX Online Technology had liabilities of CN¥583.6m due within 12 months and liabilities of CN¥27.3m due beyond that. Offsetting these obligations, it had cash of CN¥424.8m as well as receivables valued at CN¥42.3m due within 12 months. So its liabilities total CN¥143.9m more than the combination of its cash and short-term receivables.

Having regard to Beijing UBOX Online Technology's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the CN¥7.33b company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, Beijing UBOX Online Technology also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Beijing UBOX Online Technology's earnings that will influence how the balance sheet holds up in the future. 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.

In the last year Beijing UBOX Online Technology wasn't profitable at an EBIT level, but managed to grow its revenue by 5.1%, to CN¥2.8b. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Beijing UBOX Online Technology?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Beijing UBOX Online Technology had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of CN¥41m and booked a CN¥276m accounting loss. But the saving grace is the CN¥333.3m on the balance sheet. That means it could keep spending at its current rate for more than two years. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how Beijing UBOX Online Technology's profit, revenue, and operating cashflow have changed over the last few years.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.