Is Duality Biotherapeutics (HKG:9606) Weighed On By Its Debt Load?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. We note that Duality Biotherapeutics, Inc. (HKG:9606) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Duality Biotherapeutics Carry?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Duality Biotherapeutics had CN¥63.4m of debt, an increase on none, over one year. However, it does have CN¥3.71b in cash offsetting this, leading to net cash of CN¥3.64b.

A Look At Duality Biotherapeutics' Liabilities

According to the last reported balance sheet, Duality Biotherapeutics had liabilities of CN¥865.3m due within 12 months, and liabilities of CN¥399.0m due beyond 12 months. On the other hand, it had cash of CN¥3.71b and CN¥321.9m worth of receivables due within a year. So it can boast CN¥2.77b more liquid assets than total liabilities.

This short term liquidity is a sign that Duality Biotherapeutics could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Duality Biotherapeutics 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 it is future earnings, more than anything, that will determine Duality Biotherapeutics's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for Duality Biotherapeutics

Over 12 months, Duality Biotherapeutics reported revenue of CN¥2.2b, which is a gain of 16%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Duality Biotherapeutics?

While Duality Biotherapeutics lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow CN¥677m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. 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. To that end, you should be aware of the 2 warning signs we've spotted with Duality Biotherapeutics .

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.