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.' 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 Vizione Holdings Berhad (KLSE:VIZIONE) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

When Is Debt A Problem?

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 frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

View our latest analysis for Vizione Holdings Berhad

How Much Debt Does Vizione Holdings Berhad Carry?

You can click the graphic below for the historical numbers, but it shows that Vizione Holdings Berhad had RM49.5m of debt in May 2023, down from RM78.5m, one year before. However, it does have RM140.8m in cash offsetting this, leading to net cash of RM91.3m.

How Strong Is Vizione Holdings Berhad's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Vizione Holdings Berhad had liabilities of RM250.4m due within 12 months and liabilities of RM7.93m due beyond that. On the other hand, it had cash of RM140.8m and RM449.3m worth of receivables due within a year. So it actually has RM331.7m more liquid assets than total liabilities.

This excess liquidity is a great indication that Vizione Holdings Berhad's balance sheet is almost as strong as Fort Knox. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, Vizione Holdings Berhad boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is Vizione Holdings Berhad's earnings that will influence how the balance sheet holds up in the future. 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.

So How Risky Is Vizione Holdings Berhad?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Vizione Holdings Berhad had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of RM50m and booked a RM61m accounting loss. With only RM91.3m on the balance sheet, it would appear that its going to need to raise capital again soon. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. 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 3 warning signs we've spotted with Vizione Holdings Berhad (including 2 which shouldn'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.