Is ShunSin Technology Holdings (TWSE:6451) Using Too Much Debt?

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 can see that ShunSin Technology Holdings Limited (TWSE:6451) does use debt in its business. But the more important question is: how much risk is that debt creating?

The end of cancer? These 15 emerging AI stocks are developing tech that will allow early identification of life changing diseases like cancer and Alzheimer's.

When Is Debt A Problem?

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. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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. When we think about a company's use of debt, we first look at cash and debt together.

What Is ShunSin Technology Holdings's Debt?

You can click the graphic below for the historical numbers, but it shows that as of December 2024 ShunSin Technology Holdings had NT$7.27b of debt, an increase on NT$5.97b, over one year. However, it does have NT$8.41b in cash offsetting this, leading to net cash of NT$1.14b.

How Healthy Is ShunSin Technology Holdings' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that ShunSin Technology Holdings had liabilities of NT$6.05b due within 12 months and liabilities of NT$2.96b due beyond that. Offsetting these obligations, it had cash of NT$8.41b as well as receivables valued at NT$1.32b due within 12 months. So it can boast NT$725.9m more liquid assets than total liabilities.

This surplus suggests that ShunSin Technology Holdings has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, ShunSin Technology Holdings boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is ShunSin Technology Holdings's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for ShunSin Technology Holdings

In the last year ShunSin Technology Holdings's revenue was pretty flat, and it made a negative EBIT. While that's not too bad, we'd prefer see growth.

So How Risky Is ShunSin Technology Holdings?

Although ShunSin Technology Holdings had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of NT$43m. So when you consider it has net cash, along with the statutory profit, the stock probably isn't as risky as it might seem, at least in the short term. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 3 warning signs for ShunSin Technology Holdings you should be aware of, and 1 of them is concerning.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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.