Warren Buffett famously said, '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. As with many other companies Huobi Technology Holdings Limited (HKG:1611) makes use of debt. But the real question is whether this debt is making the company risky.
Why Does Debt Bring Risk?
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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
See our latest analysis for Huobi Technology Holdings
What Is Huobi Technology Holdings's Debt?
The image below, which you can click on for greater detail, shows that at March 2022 Huobi Technology Holdings had debt of HK$475.8m, up from HK$321.2m in one year. However, because it has a cash reserve of HK$375.1m, its net debt is less, at about HK$100.7m.
SEHK:1611 Debt to Equity History July 7th 2022
A Look At Huobi Technology Holdings' Liabilities
The latest balance sheet data shows that Huobi Technology Holdings had liabilities of HK$575.1m due within a year, and liabilities of HK$515.3m falling due after that. Offsetting these obligations, it had cash of HK$375.1m as well as receivables valued at HK$78.5m due within 12 months. So it has liabilities totalling HK$636.8m more than its cash and near-term receivables, combined.
Huobi Technology Holdings has a market capitalization of HK$2.00b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution.
In order to size up a company's debt relative to its earnings, we calculate its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and its earnings before interest and tax (EBIT) divided by its interest expense (its interest cover). The advantage of this approach is that we take into account both the absolute quantum of debt (with net debt to EBITDA) and the actual interest expenses associated with that debt (with its interest cover ratio).
Huobi Technology Holdings's net debt is sitting at a very reasonable 2.0 times its EBITDA, while its EBIT covered its interest expense just 3.1 times last year. While that doesn't worry us too much, it does suggest the interest payments are somewhat of a burden. Shareholders should be aware that Huobi Technology Holdings's EBIT was down 48% last year. If that earnings trend continues then paying off its debt will be about as easy as herding cats on to a roller coaster. When analysing debt levels, the balance sheet is the obvious place to start. But it is Huobi 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.
But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. So it's worth checking how much of that EBIT is backed by free cash flow. Looking at the most recent two years, Huobi Technology Holdings recorded free cash flow of 21% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt.
Our View
We'd go so far as to say Huobi Technology Holdings's EBIT growth rate was disappointing. Having said that, its ability handle its debt, based on its EBITDA, isn't such a worry. Looking at the bigger picture, it seems clear to us that Huobi Technology Holdings's use of debt is creating risks for the company. If everything goes well that may pay off but the downside of this debt is a greater risk of permanent losses. 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. Case in point: We've spotted 4 warning signs for Huobi Technology Holdings you should be aware of.
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.
巴菲特(Warren Buffett)曾说过一句名言:波动性远非风险的代名词。因此,当你考虑到任何一只股票的风险有多大时,你需要考虑债务可能是显而易见的,因为太多的债务可能会让一家公司倒闭。与许多其他公司一样火壁科技控股有限公司(HKG:1611)利用债务。但真正的问题是,这笔债务是否让该公司面临风险。
为什么债务会带来风险?
一般来说,只有当一家公司无法轻松偿还债务时,债务才会成为一个真正的问题,无论是通过筹集资金还是用自己的现金流。最终,如果公司不能履行其偿还债务的法定义务,股东可能会一无所有地离开。尽管这并不常见,但我们确实经常看到负债累累的公司永久性地稀释股东的权益,因为贷款人迫使他们以令人沮丧的价格筹集资金。话虽如此,最常见的情况是一家公司对债务管理得相当好--并对自己有利。当考虑一家企业使用了多少债务时,首先要做的是把现金和债务放在一起看。
查看我们对火壁科技控股的最新分析
火比科技控股的债务是什么?
下图显示,截至2022年3月,火比科技控股有限公司的债务为4.758亿港元,高于一年内的3.212亿港元。你可以点击查看更多细节。然而,由于该公司拥有3.751亿港元的现金储备,其净债务较少,约为1.07亿港元。
联交所:1611债转股历史2022年7月7日
霍壁科技控股公司的负债状况
最新的资产负债表数据显示,火比科技控股有5.751亿港元的负债在一年内到期,5.153亿港元的负债在一年内到期。作为这些债务的抵消,该公司有3.751亿港元的现金以及7850万港元的应收账款在12个月内到期。因此,该公司的负债总额为6.368亿港元,超过其现金和近期应收账款的总和。
火比科技控股的市值为2.0亿港元,因此如果有需要,它很可能会筹集现金来改善其资产负债表。但很明显,我们绝对应该仔细检查它是否能够在不稀释的情况下管理债务。
为了评估一家公司的债务相对于它的收益,我们计算它的净债务除以它的利息、税项、折旧和摊销前收益(EBITDA)和它的利息和税前收益(EBIT)除以它的利息支出(它的利息覆盖)。这种方法的优点是,我们既考虑了债务的绝对数量(净债务与EBITDA之比),也考虑了与债务相关的实际利息支出(及其利息覆盖率)。
火比科技控股的净债务相当于其息税前利润的2.0倍,相当合理,而去年其息税前利润仅为利息支出的3.1倍。虽然这并不让我们太担心,但它确实表明利息支付在某种程度上是一种负担。股东们应该知道,火壁科技控股去年的息税前利润下降了48%。如果这种盈利趋势持续下去,那么偿还债务就像把猫赶上过山车一样容易。在分析债务水平时,资产负债表显然是一个起点。但未来影响资产负债表表现的将是火比科技控股的盈利情况。因此,当考虑债务时,绝对值得关注收益趋势。点击此处查看互动快照。
但我们的最后考虑也很重要,因为一家公司不能用账面利润来偿还债务;它需要冷硬现金。因此,有必要检查这笔息税前利润中有多少是由自由现金流支持的。看看最近两年,火壁科技控股录得相当于息税前利润21%的自由现金流,这比我们预期的要弱。当涉及到偿还债务时,这并不是很好。
我们的观点
我们甚至可以说,火壁科技控股的息税前利润增长率令人失望。话虽如此,根据其EBITDA,它处理债务的能力并不是那么令人担忧。从更大的角度来看,我们似乎很清楚,火比科技控股公司的债务使用正在给公司带来风险。如果一切顺利,这可能会得到回报,但这笔债务的不利之处是永久性损失的风险更大。毫无疑问,我们从资产负债表中了解到的债务最多。然而,并非所有投资风险都存在于资产负债表中--远非如此。一个恰当的例子:我们发现了火壁科技控股的4个警告信号你应该意识到。
如果你对一家增长迅速、资产负债表坚如磐石的公司更感兴趣,那么请立即查看我们的净现金成长型股票清单。
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本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。