Does Xinda Investment Holdings (HKG:1281) Have A Healthy Balance Sheet?

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.' 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 Xinda Investment Holdings Limited (HKG:1281) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Xinda Investment Holdings Carry?

You can click the graphic below for the historical numbers, but it shows that Xinda Investment Holdings had CN¥119.5m of debt in June 2025, down from CN¥147.1m, one year before. However, its balance sheet shows it holds CN¥254.2m in cash, so it actually has CN¥134.8m net cash.

How Healthy Is Xinda Investment Holdings' Balance Sheet?

According to the last reported balance sheet, Xinda Investment Holdings had liabilities of CN¥130.1m due within 12 months, and liabilities of CN¥125.8m due beyond 12 months. On the other hand, it had cash of CN¥254.2m and CN¥403.2m worth of receivables due within a year. So it actually has CN¥401.5m more liquid assets than total liabilities.

This luscious liquidity implies that Xinda Investment Holdings' balance sheet is sturdy like a giant sequoia tree. Having regard to this fact, we think its balance sheet is as strong as an ox. Simply put, the fact that Xinda Investment Holdings has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Xinda Investment Holdings 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.

View our latest analysis for Xinda Investment Holdings

Over 12 months, Xinda Investment Holdings reported revenue of CN¥146m, which is a gain of 41%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

So How Risky Is Xinda Investment Holdings?

Although Xinda Investment Holdings had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of CN¥42m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. Given it also grew revenue by 41% over the last year, we think there's a good chance the company is on track. That growth could mean this is one stock well worth watching. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - Xinda Investment Holdings has 1 warning sign we think you should be aware of.

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.