Is Peijia Medical (HKG:9996) Using Debt Sensibly?

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.' 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. As with many other companies Peijia Medical Limited (HKG:9996) makes use of debt. But the real question is whether this debt is making the company risky.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

What Is Peijia Medical's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Peijia Medical had debt of CN¥315.7m, up from CN¥248.4m in one year. But it also has CN¥601.8m in cash to offset that, meaning it has CN¥286.0m net cash.

A Look At Peijia Medical's Liabilities

The latest balance sheet data shows that Peijia Medical had liabilities of CN¥463.2m due within a year, and liabilities of CN¥151.4m falling due after that. Offsetting this, it had CN¥601.8m in cash and CN¥58.7m in receivables that were due within 12 months. So it can boast CN¥45.8m more liquid assets than total liabilities.

This state of affairs indicates that Peijia Medical's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the CN¥3.25b company is struggling for cash, we still think it's worth monitoring its balance sheet. Succinctly put, Peijia Medical 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 Peijia Medical's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

View our latest analysis for Peijia Medical

In the last year Peijia Medical wasn't profitable at an EBIT level, but managed to grow its revenue by 29%, to CN¥668m. With any luck the company will be able to grow its way to profitability.

So How Risky Is Peijia Medical?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that Peijia Medical had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through CN¥350m of cash and made a loss of CN¥225m. But at least it has CN¥286.0m on the balance sheet to spend on growth, near-term. Peijia Medical's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. 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 Peijia Medical's profit, revenue, and operating cashflow have changed over the last few years.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.