Is Tyntek (TWSE:2426) Weighed On By Its Debt Load?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Tyntek Corporation (TWSE:2426) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

What Risk Does Debt Bring?

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. 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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for Tyntek

How Much Debt Does Tyntek Carry?

You can click the graphic below for the historical numbers, but it shows that Tyntek had NT$282.1m of debt in June 2024, down from NT$692.9m, one year before. But it also has NT$1.33b in cash to offset that, meaning it has NT$1.05b net cash.

A Look At Tyntek's Liabilities

Zooming in on the latest balance sheet data, we can see that Tyntek had liabilities of NT$851.5m due within 12 months and liabilities of NT$360.5m due beyond that. Offsetting this, it had NT$1.33b in cash and NT$867.0m in receivables that were due within 12 months. So it actually has NT$984.6m more liquid assets than total liabilities.

This surplus suggests that Tyntek has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Tyntek 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 Tyntek'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, Tyntek reported revenue of NT$2.4b, which is a gain of 7.9%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Tyntek?

Although Tyntek had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of NT$74m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. 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. Be aware that Tyntek is showing 2 warning signs in our investment analysis , and 1 of those 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.