Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. Importantly, Tunghsu Optoelectronic Technology Co., Ltd. (SZSE:200413) does carry debt. But the real question is whether this debt is making the company risky.
What Risk Does Debt Bring?
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. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.
View our latest analysis for Tunghsu Optoelectronic Technology
What Is Tunghsu Optoelectronic Technology's Debt?
As you can see below, at the end of March 2022, Tunghsu Optoelectronic Technology had CN¥21.9b of debt, up from CN¥20.7b a year ago. Click the image for more detail. However, it also had CN¥9.24b in cash, and so its net debt is CN¥12.7b.
SZSE:200413 Debt to Equity History July 12th 2022
A Look At Tunghsu Optoelectronic Technology's Liabilities
Zooming in on the latest balance sheet data, we can see that Tunghsu Optoelectronic Technology had liabilities of CN¥33.7b due within 12 months and liabilities of CN¥3.18b due beyond that. Offsetting this, it had CN¥9.24b in cash and CN¥11.6b in receivables that were due within 12 months. So its liabilities total CN¥16.0b more than the combination of its cash and short-term receivables.
This deficit casts a shadow over the CN¥10.5b company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. After all, Tunghsu Optoelectronic Technology would likely require a major re-capitalisation if it had to pay its creditors today. When analysing debt levels, the balance sheet is the obvious place to start. But it is Tunghsu Optoelectronic Technology'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.
Over 12 months, Tunghsu Optoelectronic Technology made a loss at the EBIT level, and saw its revenue drop to CN¥5.8b, which is a fall of 20%. That makes us nervous, to say the least.
Caveat Emptor
While Tunghsu Optoelectronic Technology's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping CN¥1.6b. Considering that alongside the liabilities mentioned above make us nervous about the company. It would need to improve its operations quickly for us to be interested in it. For example, we would not want to see a repeat of last year's loss of CN¥2.9b. And until that time we think this is a risky stock. 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. For example, we've discovered 2 warning signs for Tunghsu Optoelectronic Technology (1 shouldn't be ignored!) that you should be aware of before investing here.
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.
传奇基金经理理想汽车·卢曾说，最大的投资风险不是价格的波动，而是你是否会遭受永久性的资本损失。当我们考虑一家公司的风险有多大时，我们总是喜欢看它对债务的使用，因为债务过重可能导致破产。重要的是东苏光电科技有限公司。(SZSE：200413)确实有债务。但真正的问题是，这笔债务是否让该公司面临风险。
债务会带来什么风险？
债务帮助企业，直到企业难以偿还债务，无论是用新资本还是用自由现金流。如果情况真的变得很糟糕，贷款人可以控制业务。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。当然，在企业中，债务可以是一个重要的工具，特别是资本密集型企业。当我们考虑一家公司的债务用途时，我们首先会把现金和债务放在一起看。
查看我们对东旭光电科技的最新分析
东旭光电的债务是什么？
如下所示，截至2022年3月底，东旭光电科技的债务为219亿加元，高于一年前的207亿加元。单击图像了解更多详细信息。然而，它也有92.4亿元现金，因此其净债务为127亿元。
深交所：200413债转股历史2022年7月12日
看东旭光电科技的负债状况
放大最新的资产负债表数据可以看到，东旭光电有337亿元的负债在12个月内到期，31.8亿元的负债在12个月内到期。作为抵消，它有92.4亿加元的现金和116亿加元的应收账款在12个月内到期。因此，其负债总额为人民币160亿元，比现金和短期应收账款之和还要多。
这一赤字给这家105亿元人民币的公司蒙上了一层阴影，就像一个庞然大物耸立在凡人之上。因此，毫无疑问，我们会密切关注它的资产负债表。毕竟，如果东旭光电科技今天不得不偿还债权人的债务，它很可能需要进行一次重大的资本重组。在分析债务水平时，资产负债表显然是一个起点。但影响未来资产负债表表现的将是东旭光电的盈利情况。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。
12个月来，东旭光电在息税前利润层面出现亏损，收入下降至58亿加元，降幅为20%。至少可以说，这让我们感到紧张。
告诫买入者
虽然东旭光电不断下滑的营收令人心碎，但可以说，其息税前利润(EBIT)亏损就更没有吸引力了。其息税前利润损失高达人民币16亿元。考虑到上面提到的债务，让我们对公司感到紧张。它需要迅速改善运营，才能让我们对它感兴趣。例如，我们不希望看到去年亏损29亿元的情况重演。在此之前，我们认为这是一只高风险的股票。在分析债务水平时，资产负债表显然是一个起点。然而，并非所有投资风险都存在于资产负债表中--远非如此。例如，我们发现东旭光电科技的2个警示标志(1不应该被忽视！)在这里投资之前你应该意识到这一点。
归根结底，关注那些没有净债务的公司往往更好。你可以访问我们的这类公司的特别名单(都有利润增长的记录)。这是免费的。
对这篇文章有什么反馈吗？担心内容吗？ 保持联系直接与我们联系。或者，也可以给编辑组发电子邮件，地址是implywallst.com。
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。
