Jenscare Scientific (HKG:9877) Has Debt But No Earnings; Should You Worry?

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 can see that Jenscare Scientific Co., Ltd. (HKG:9877) does use debt in its business. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Jenscare Scientific's Debt?

As you can see below, Jenscare Scientific had CN¥54.2m of debt, at June 2025, which is about the same as the year before. You can click the chart for greater detail. However, its balance sheet shows it holds CN¥530.8m in cash, so it actually has CN¥476.6m net cash.

How Strong Is Jenscare Scientific's Balance Sheet?

The latest balance sheet data shows that Jenscare Scientific had liabilities of CN¥95.7m due within a year, and liabilities of CN¥17.0m falling due after that. On the other hand, it had cash of CN¥530.8m and CN¥6.26m worth of receivables due within a year. So it actually has CN¥424.4m more liquid assets than total liabilities.

This surplus suggests that Jenscare Scientific has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Jenscare Scientific 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 you can't view debt in total isolation; since Jenscare Scientific 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.

View our latest analysis for Jenscare Scientific

In the last year Jenscare Scientific managed to produce its first revenue as a listed company, but given the lack of profit, shareholders will no doubt be hoping to see some strong increases.

So How Risky Is Jenscare Scientific?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months Jenscare Scientific lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of CN¥259m and booked a CN¥245m accounting loss. But at least it has CN¥476.6m on the balance sheet to spend on growth, near-term. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. 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. To that end, you should be aware of the 2 warning signs we've spotted with Jenscare Scientific .

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.