Thunder Tiger (TWSE:8033) Is Carrying A Fair Bit Of Debt

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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, Thunder Tiger Corp. (TWSE:8033) does carry debt. But the more important question is: how much risk is that debt creating?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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.

Check out our latest analysis for Thunder Tiger

What Is Thunder Tiger's Debt?

You can click the graphic below for the historical numbers, but it shows that Thunder Tiger had NT$486.2m of debt in March 2024, down from NT$561.6m, one year before. However, it also had NT$349.6m in cash, and so its net debt is NT$136.6m.

How Strong Is Thunder Tiger's Balance Sheet?

The latest balance sheet data shows that Thunder Tiger had liabilities of NT$547.9m due within a year, and liabilities of NT$266.5m falling due after that. Offsetting these obligations, it had cash of NT$349.6m as well as receivables valued at NT$160.2m due within 12 months. So its liabilities total NT$304.6m more than the combination of its cash and short-term receivables.

Given Thunder Tiger has a market capitalization of NT$9.63b, it's hard to believe these liabilities pose much threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. Carrying virtually no net debt, Thunder Tiger has a very light debt load indeed. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Thunder Tiger'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.

In the last year Thunder Tiger had a loss before interest and tax, and actually shrunk its revenue by 7.7%, to NT$1.0b. That's not what we would hope to see.

Caveat Emptor

Importantly, Thunder Tiger had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at NT$53m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled NT$247m in negative free cash flow over the last twelve months. So suffice it to say we do consider the stock to be risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Thunder Tiger you should know about.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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.