Mayur Uniquoters (NSE:MAYURUNIQ) Has A Pretty Healthy Balance Sheet

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. We note that Mayur Uniquoters Limited (NSE:MAYURUNIQ) does have debt on its balance sheet. But is this debt a concern to shareholders?

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. If things get really bad, the lenders can take control of the business. 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. 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.

See our latest analysis for Mayur Uniquoters

What Is Mayur Uniquoters's Debt?

The image below, which you can click on for greater detail, shows that Mayur Uniquoters had debt of ₹318.4m at the end of September 2021, a reduction from ₹552.3m over a year. However, its balance sheet shows it holds ₹1.27b in cash, so it actually has ₹950.1m net cash.

How Healthy Is Mayur Uniquoters' Balance Sheet?

We can see from the most recent balance sheet that Mayur Uniquoters had liabilities of ₹1.14b falling due within a year, and liabilities of ₹173.7m due beyond that. On the other hand, it had cash of ₹1.27b and ₹1.42b worth of receivables due within a year. So it actually has ₹1.37b more liquid assets than total liabilities.

This short term liquidity is a sign that Mayur Uniquoters could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Mayur Uniquoters boasts net cash, so it's fair to say it does not have a heavy debt load!

On top of that, Mayur Uniquoters grew its EBIT by 47% over the last twelve months, and that growth will make it easier to handle its debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Mayur Uniquoters'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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Mayur Uniquoters has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. In the last three years, Mayur Uniquoters created free cash flow amounting to 4.2% of its EBIT, an uninspiring performance. For us, cash conversion that low sparks a little paranoia about is ability to extinguish debt.

Summing up

While we empathize with investors who find debt concerning, you should keep in mind that Mayur Uniquoters has net cash of ₹950.1m, as well as more liquid assets than liabilities. And it impressed us with its EBIT growth of 47% over the last year. So is Mayur Uniquoters's debt a risk? It doesn't seem so to us. 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. For example, we've discovered 3 warning signs for Mayur Uniquoters that you should be aware of before investing here.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.