Does Vizione Holdings Berhad (KLSE:VIZIONE) Have A Healthy Balance Sheet?

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 Vizione Holdings Berhad (KLSE:VIZIONE) does use debt in its business. But is this debt a concern to shareholders?

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. If things get really bad, the lenders can take control of the business. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

View our latest analysis for Vizione Holdings Berhad

What Is Vizione Holdings Berhad's Net Debt?

As you can see below, Vizione Holdings Berhad had RM49.5m of debt at May 2023, down from RM78.5m a year prior. On the flip side, it has RM13.9m in cash leading to net debt of about RM35.6m.

A Look At Vizione Holdings Berhad's Liabilities

The latest balance sheet data shows that Vizione Holdings Berhad had liabilities of RM240.4m due within a year, and liabilities of RM18.2m falling due after that. On the other hand, it had cash of RM13.9m and RM603.9m worth of receivables due within a year. So it actually has RM359.3m more liquid assets than total liabilities.

This surplus liquidity suggests that Vizione Holdings Berhad's balance sheet could take a hit just as well as Homer Simpson's head can take a punch. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Vizione Holdings Berhad 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.

Over 12 months, Vizione Holdings Berhad made a loss at the EBIT level, and saw its revenue drop to RM261m, which is a fall of 2.2%. That's not what we would hope to see.

Caveat Emptor

Over the last twelve months Vizione Holdings Berhad produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable RM32m at the EBIT level. That said, we're impressed with the strong balance sheet liquidity. That will give the company some time and space to grow and develop its business as need be. While the stock is probably a bit risky, there may be an opportunity if the business itself improves, allowing the company to stage a recovery. 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. These risks can be hard to spot. Every company has them, and we've spotted 4 warning signs for Vizione Holdings Berhad (of which 3 are significant!) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.