Here's Why ImmuneOnco Biopharmaceuticals (Shanghai) (HKG:1541) Can Manage Its Debt Despite Losing Money

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, ImmuneOnco Biopharmaceuticals (Shanghai) Inc. (HKG:1541) does carry debt. But is this debt a concern to shareholders?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is ImmuneOnco Biopharmaceuticals (Shanghai)'s Net Debt?

The image below, which you can click on for greater detail, shows that at December 2024 ImmuneOnco Biopharmaceuticals (Shanghai) had debt of CN¥115.4m, up from CN¥60.0m in one year. But it also has CN¥752.1m in cash to offset that, meaning it has CN¥636.7m net cash.

How Healthy Is ImmuneOnco Biopharmaceuticals (Shanghai)'s Balance Sheet?

Zooming in on the latest balance sheet data, we can see that ImmuneOnco Biopharmaceuticals (Shanghai) had liabilities of CN¥214.6m due within 12 months and liabilities of CN¥29.0m due beyond that. On the other hand, it had cash of CN¥752.1m and CN¥16.0k worth of receivables due within a year. So it can boast CN¥508.4m more liquid assets than total liabilities.

It's good to see that ImmuneOnco Biopharmaceuticals (Shanghai) has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, ImmuneOnco Biopharmaceuticals (Shanghai) boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine ImmuneOnco Biopharmaceuticals (Shanghai)'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.

Check out our latest analysis for ImmuneOnco Biopharmaceuticals (Shanghai)

In the last year ImmuneOnco Biopharmaceuticals (Shanghai) wasn't profitable at an EBIT level, but managed to grow its revenue by 867%, to CN¥74m. That's virtually the hole-in-one of revenue growth!

So How Risky Is ImmuneOnco Biopharmaceuticals (Shanghai)?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months ImmuneOnco Biopharmaceuticals (Shanghai) lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of CN¥366m and booked a CN¥316m accounting loss. But at least it has CN¥636.7m on the balance sheet to spend on growth, near-term. Importantly, ImmuneOnco Biopharmaceuticals (Shanghai)'s revenue growth is hot to trot. High growth pre-profit companies may well be risky, but they can also offer great rewards. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 1 warning sign for ImmuneOnco Biopharmaceuticals (Shanghai) you should be aware of.

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.