Is ViTrox Corporation Berhad (KLSE:VITROX) Using Too Much Debt?

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. Importantly, ViTrox Corporation Berhad (KLSE:VITROX) does carry debt. But should shareholders be worried about its use of debt?

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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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is ViTrox Corporation Berhad's Debt?

The image below, which you can click on for greater detail, shows that at June 2025 ViTrox Corporation Berhad had debt of RM107.3m, up from RM57.3m in one year. However, it does have RM460.1m in cash offsetting this, leading to net cash of RM352.8m.

How Strong Is ViTrox Corporation Berhad's Balance Sheet?

The latest balance sheet data shows that ViTrox Corporation Berhad had liabilities of RM196.2m due within a year, and liabilities of RM96.9m falling due after that. On the other hand, it had cash of RM460.1m and RM239.5m worth of receivables due within a year. So it can boast RM406.5m more liquid assets than total liabilities.

This surplus suggests that ViTrox Corporation Berhad has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that ViTrox Corporation Berhad has more cash than debt is arguably a good indication that it can manage its debt safely.

Check out our latest analysis for ViTrox Corporation Berhad

The good news is that ViTrox Corporation Berhad has increased its EBIT by 4.1% over twelve months, which should ease any concerns about debt repayment. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if ViTrox Corporation 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. While ViTrox Corporation Berhad 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. Looking at the most recent three years, ViTrox Corporation Berhad recorded free cash flow of 32% of its EBIT, which is weaker than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

While it is always sensible to investigate a company's debt, in this case ViTrox Corporation Berhad has RM352.8m in net cash and a decent-looking balance sheet. On top of that, it increased its EBIT by 4.1% in the last twelve months. So we don't have any problem with ViTrox Corporation Berhad's use of debt. Over time, share prices tend to follow earnings per share, so if you're interested in ViTrox Corporation Berhad, you may well want to click here to check an interactive graph of its earnings per share history.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.