Uxin (NASDAQ:UXIN) Is Making Moderate Use 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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies Uxin Limited (NASDAQ:UXIN) makes use of debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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 Uxin's Net Debt?

As you can see below, at the end of June 2025, Uxin had CN¥235.9m of debt, up from CN¥115.1m a year ago. Click the image for more detail. However, it also had CN¥68.3m in cash, and so its net debt is CN¥167.6m.

How Strong Is Uxin's Balance Sheet?

We can see from the most recent balance sheet that Uxin had liabilities of CN¥649.8m falling due within a year, and liabilities of CN¥1.37b due beyond that. Offsetting these obligations, it had cash of CN¥68.3m as well as receivables valued at CN¥3.60m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by CN¥1.95b.

Uxin has a market capitalization of CN¥4.43b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. 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 Uxin's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Check out our latest analysis for Uxin

In the last year Uxin wasn't profitable at an EBIT level, but managed to grow its revenue by 64%, to CN¥2.4b. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, Uxin still had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at CN¥139m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled CN¥301m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. 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 1 warning sign for Uxin 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.