UWC Berhad (KLSE:UWC) Has A Pretty 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.' 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. As with many other companies UWC Berhad (KLSE:UWC) makes use of debt. But the real question is whether this debt is making the company risky.

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does UWC Berhad Carry?

The image below, which you can click on for greater detail, shows that at April 2025 UWC Berhad had debt of RM9.00m, up from none in one year. But it also has RM34.5m in cash to offset that, meaning it has RM25.5m net cash.

A Look At UWC Berhad's Liabilities

Zooming in on the latest balance sheet data, we can see that UWC Berhad had liabilities of RM77.9m due within 12 months and liabilities of RM14.4m due beyond that. Offsetting this, it had RM34.5m in cash and RM196.3m in receivables that were due within 12 months. So it actually has RM138.5m more liquid assets than total liabilities.

This surplus suggests that UWC Berhad has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, UWC Berhad boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for UWC Berhad

In addition to that, we're happy to report that UWC Berhad has boosted its EBIT by 85%, thus reducing the spectre of future debt repayments. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if UWC Berhad can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. UWC Berhad may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last three years, UWC Berhad recorded negative free cash flow, in total. Debt is usually more expensive, and almost always more risky in the hands of a company with negative free cash flow. Shareholders ought to hope for an improvement.

Summing Up

While it is always sensible to investigate a company's debt, in this case UWC Berhad has RM25.5m in net cash and a decent-looking balance sheet. And it impressed us with its EBIT growth of 85% over the last year. So we don't think UWC Berhad's use of debt is risky. 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 learn about the 2 warning signs we've spotted with UWC Berhad (including 1 which can't be ignored) .

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.