HT Media (NSE:HTMEDIA) Has Debt But No Earnings; Should You Worry?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that HT Media Limited (NSE:HTMEDIA) does use debt in its business. 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. 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, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is HT Media's Net Debt?

You can click the graphic below for the historical numbers, but it shows that HT Media had ₹8.35b of debt in September 2024, down from ₹10.1b, one year before. However, its balance sheet shows it holds ₹13.4b in cash, so it actually has ₹5.06b net cash.

How Strong Is HT Media's Balance Sheet?

According to the last reported balance sheet, HT Media had liabilities of ₹17.7b due within 12 months, and liabilities of ₹2.08b due beyond 12 months. Offsetting this, it had ₹13.4b in cash and ₹3.47b in receivables that were due within 12 months. So its liabilities total ₹2.95b more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of ₹3.80b, so it does suggest shareholders should keep an eye on HT Media's use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. While it does have liabilities worth noting, HT Media also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is HT Media's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for HT Media

In the last year HT Media wasn't profitable at an EBIT level, but managed to grow its revenue by 5.1%, to ₹18b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is HT Media?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months HT Media lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of ₹524m and booked a ₹378m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of ₹5.06b. That means it could keep spending at its current rate for more than two years. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. 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 1 warning sign for HT Media that you should be aware of before investing here.

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.