Does 3D Medicines (HKG:1244) 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. As with many other companies 3D Medicines Inc. (HKG:1244) makes use of debt. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. 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.

How Much Debt Does 3D Medicines Carry?

As you can see below, 3D Medicines had CN¥148.8m of debt at June 2025, down from CN¥229.7m a year prior. However, it does have CN¥447.1m in cash offsetting this, leading to net cash of CN¥298.3m.

A Look At 3D Medicines' Liabilities

The latest balance sheet data shows that 3D Medicines had liabilities of CN¥504.9m due within a year, and liabilities of CN¥5.02m falling due after that. Offsetting this, it had CN¥447.1m in cash and CN¥173.9m in receivables that were due within 12 months. So it actually has CN¥111.1m more liquid assets than total liabilities.

This short term liquidity is a sign that 3D Medicines could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, 3D Medicines 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 3D Medicines will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

See our latest analysis for 3D Medicines

In the last year 3D Medicines had a loss before interest and tax, and actually shrunk its revenue by 8.3%, to CN¥448m. We would much prefer see growth.

So How Risky Is 3D Medicines?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year 3D Medicines had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through CN¥236m of cash and made a loss of CN¥169m. However, it has net cash of CN¥298.3m, so it has a bit of time before it will need more capital. 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. For riskier companies like 3D Medicines I always like to keep an eye on whether insiders are buying or selling. So click here if you want to find out for yourself.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.