Health Check: How Prudently Does Angelalign Technology (HKG:6699) Use Debt?

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 Angelalign Technology Inc. (HKG:6699) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

Our free stock report includes 1 warning sign investors should be aware of before investing in Angelalign Technology. Read for free now.

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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Angelalign Technology's Net Debt?

As you can see below, at the end of December 2024, Angelalign Technology had US$3.35m of debt, up from US$2.45m a year ago. Click the image for more detail. However, it does have US$436.8m in cash offsetting this, leading to net cash of US$433.5m.

How Healthy Is Angelalign Technology's Balance Sheet?

The latest balance sheet data shows that Angelalign Technology had liabilities of US$128.1m due within a year, and liabilities of US$69.8m falling due after that. Offsetting these obligations, it had cash of US$436.8m as well as receivables valued at US$22.7m due within 12 months. So it can boast US$261.7m more liquid assets than total liabilities.

It's good to see that Angelalign Technology has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Succinctly put, Angelalign Technology 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 it is future earnings, more than anything, that will determine Angelalign Technology'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.

See our latest analysis for Angelalign Technology

In the last year Angelalign Technology wasn't profitable at an EBIT level, but managed to grow its revenue by 28%, to US$269m. With any luck the company will be able to grow its way to profitability.

So How Risky Is Angelalign Technology?

Although Angelalign Technology had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of US$12m. 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 28% is a good sign. We'd see further strong growth as an optimistic indication. 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 1 warning sign for Angelalign Technology that you should be aware of.

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.