Is EHang Holdings (NASDAQ:EH) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. As with many other companies EHang Holdings Limited (NASDAQ:EH) makes use of debt. But should shareholders be worried about its use of debt?

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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. 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 EHang Holdings's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 EHang Holdings had debt of CN¥170.1m, up from CN¥59.0m in one year. However, it does have CN¥1.08b in cash offsetting this, leading to net cash of CN¥912.6m.

How Healthy Is EHang Holdings' Balance Sheet?

The latest balance sheet data shows that EHang Holdings had liabilities of CN¥486.7m due within a year, and liabilities of CN¥191.5m falling due after that. On the other hand, it had cash of CN¥1.08b and CN¥28.5m worth of receivables due within a year. So it can boast CN¥432.9m more liquid assets than total liabilities.

This surplus suggests that EHang Holdings has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that EHang Holdings has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine EHang Holdings's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

View our latest analysis for EHang Holdings

In the last year EHang Holdings wasn't profitable at an EBIT level, but managed to grow its revenue by 168%, to CN¥421m. So its pretty obvious shareholders are hoping for more growth!

So How Risky Is EHang Holdings?

Although EHang Holdings had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of CN¥118m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. Keeping in mind its 168% revenue growth over the last year, we think there's a decent chance the company is on track. We'd see further strong growth as an optimistic indication. For riskier companies like EHang Holdings I always like to keep an eye on the long term profit and revenue trends. Fortunately, you can click to see our interactive graph of its profit, revenue, and operating cashflow.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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.