Rock star Growth Puts Jacobio Pharmaceuticals Group (HKG:1167) In A Position To 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 can see that Jacobio Pharmaceuticals Group Co., Ltd. (HKG:1167) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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 frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Jacobio Pharmaceuticals Group's Net Debt?

As you can see below, at the end of June 2025, Jacobio Pharmaceuticals Group had CN¥134.3m of debt, up from CN¥63.8m a year ago. Click the image for more detail. However, its balance sheet shows it holds CN¥993.8m in cash, so it actually has CN¥859.5m net cash.

How Strong Is Jacobio Pharmaceuticals Group's Balance Sheet?

We can see from the most recent balance sheet that Jacobio Pharmaceuticals Group had liabilities of CN¥150.3m falling due within a year, and liabilities of CN¥273.6m due beyond that. Offsetting these obligations, it had cash of CN¥993.8m as well as receivables valued at CN¥57.5m due within 12 months. So it can boast CN¥627.4m more liquid assets than total liabilities.

This surplus suggests that Jacobio Pharmaceuticals Group has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Jacobio Pharmaceuticals Group has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Jacobio Pharmaceuticals Group can strengthen its balance sheet over time. 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 Jacobio Pharmaceuticals Group

Over 12 months, Jacobio Pharmaceuticals Group reported revenue of CN¥201m, which is a gain of 769%, although it did not report any earnings before interest and tax. When it comes to revenue growth, that's like nailing the game winning 3-pointer!

So How Risky Is Jacobio Pharmaceuticals Group?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months Jacobio Pharmaceuticals Group lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through CN¥44m of cash and made a loss of CN¥46m. But the saving grace is the CN¥859.5m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Importantly, Jacobio Pharmaceuticals Group's revenue growth is hot to trot. High growth pre-profit companies may well be risky, but they can also offer great rewards. 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. We've identified 1 warning sign with Jacobio Pharmaceuticals Group , and understanding them should be part of your investment process.

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.