Notion VTec Berhad (KLSE:NOTION) Has A Rock Solid 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 Notion VTec Berhad (KLSE:NOTION) 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?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Notion VTec Berhad Carry?

The image below, which you can click on for greater detail, shows that at June 2025 Notion VTec Berhad had debt of RM32.7m, up from RM8.71m in one year. But on the other hand it also has RM44.8m in cash, leading to a RM12.1m net cash position.

A Look At Notion VTec Berhad's Liabilities

Zooming in on the latest balance sheet data, we can see that Notion VTec Berhad had liabilities of RM84.2m due within 12 months and liabilities of RM63.9m due beyond that. Offsetting this, it had RM44.8m in cash and RM135.0m in receivables that were due within 12 months. So it can boast RM31.6m more liquid assets than total liabilities.

This short term liquidity is a sign that Notion VTec Berhad could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Notion VTec Berhad has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Notion VTec Berhad

Even more impressive was the fact that Notion VTec Berhad grew its EBIT by 235% over twelve months. That boost will make it even easier to pay down debt going forward. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Notion VTec Berhad's ability to maintain a healthy balance sheet going forward. 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. Notion VTec 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. In the last two years, Notion VTec Berhad's free cash flow amounted to 26% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Notion VTec Berhad has net cash of RM12.1m, as well as more liquid assets than liabilities. And it impressed us with its EBIT growth of 235% over the last year. So we don't think Notion VTec Berhad's use of debt is risky. There's no doubt that we learn most about debt from the balance sheet. 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 2 warning signs for Notion VTec Berhad you should know about.

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.