Does Ruihe Data Technology Holdings (HKG:3680) Have A Healthy Balance Sheet?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the 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. Importantly, Ruihe Data Technology Holdings Limited (HKG:3680) does carry debt. But is this debt a concern to shareholders?

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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. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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.

How Much Debt Does Ruihe Data Technology Holdings Carry?

The image below, which you can click on for greater detail, shows that Ruihe Data Technology Holdings had debt of CN¥130.5m at the end of June 2025, a reduction from CN¥174.1m over a year. However, it does have CN¥25.7m in cash offsetting this, leading to net debt of about CN¥104.8m.

How Healthy Is Ruihe Data Technology Holdings' Balance Sheet?

The latest balance sheet data shows that Ruihe Data Technology Holdings had liabilities of CN¥225.7m due within a year, and liabilities of CN¥583.0k falling due after that. Offsetting these obligations, it had cash of CN¥25.7m as well as receivables valued at CN¥142.9m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by CN¥57.7m.

Of course, Ruihe Data Technology Holdings has a market capitalization of CN¥1.28b, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Ruihe Data Technology Holdings will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

See our latest analysis for Ruihe Data Technology Holdings

In the last year Ruihe Data Technology Holdings had a loss before interest and tax, and actually shrunk its revenue by 26%, to CN¥317m. That makes us nervous, to say the least.

Caveat Emptor

Not only did Ruihe Data Technology Holdings's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Indeed, it lost CN¥38m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through CN¥18m of cash over the last year. So suffice it to say we do consider the stock to be risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example Ruihe Data Technology Holdings has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.