RLX Technology (NYSE:RLX) 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. We note that RLX Technology Inc. (NYSE:RLX) does have debt on its balance sheet. But is this debt a concern to shareholders?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does RLX Technology Carry?

As you can see below, at the end of March 2025, RLX Technology had CN¥60.0m of debt, up from none a year ago. Click the image for more detail. But on the other hand it also has CN¥8.16b in cash, leading to a CN¥8.10b net cash position.

How Strong Is RLX Technology's Balance Sheet?

The latest balance sheet data shows that RLX Technology had liabilities of CN¥819.6m due within a year, and liabilities of CN¥29.5m falling due after that. Offsetting these obligations, it had cash of CN¥8.16b as well as receivables valued at CN¥331.7m due within 12 months. So it can boast CN¥7.65b more liquid assets than total liabilities.

This luscious liquidity implies that RLX Technology's balance sheet is sturdy like a giant sequoia tree. Having regard to this fact, we think its balance sheet is as strong as an ox. Succinctly put, RLX Technology boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for RLX Technology

Although RLX Technology made a loss at the EBIT level, last year, it was also good to see that it generated CN¥22m in EBIT over the last twelve months. 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 RLX Technology'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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. RLX Technology 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. Over the last year, RLX Technology actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While it is always sensible to investigate a company's debt, in this case RLX Technology has CN¥8.10b in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of CN¥1.0b, being 4,772% of its EBIT. So is RLX Technology's debt a risk? It doesn't seem so to us. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 1 warning sign for RLX Technology you should be aware of.

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.

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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.