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.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies Minth Group Limited (HKG:425) makes use of 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. 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. 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.
View our latest analysis for Minth Group
What Is Minth Group's Debt?
The chart below, which you can click on for greater detail, shows that Minth Group had CN¥8.23b in debt in June 2022; about the same as the year before. However, it also had CN¥4.64b in cash, and so its net debt is CN¥3.58b.
SEHK:425 Debt to Equity History August 29th 2022
A Look At Minth Group's Liabilities
We can see from the most recent balance sheet that Minth Group had liabilities of CN¥10.1b falling due within a year, and liabilities of CN¥3.27b due beyond that. Offsetting these obligations, it had cash of CN¥4.64b as well as receivables valued at CN¥4.62b due within 12 months. So it has liabilities totalling CN¥4.10b more than its cash and near-term receivables, combined.
Given Minth Group has a market capitalization of CN¥23.3b, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time.
We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.
We'd say that Minth Group's moderate net debt to EBITDA ratio ( being 2.0), indicates prudence when it comes to debt. And its commanding EBIT of 1k times its interest expense, implies the debt load is as light as a peacock feather. Importantly, Minth Group's EBIT fell a jaw-dropping 48% in the last twelve months. If that earnings trend continues then paying off its debt will be about as easy as herding cats on to a roller coaster. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Minth Group can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. So the logical step is to look at the proportion of that EBIT that is matched by actual free cash flow. Over the last three years, Minth Group saw substantial negative free cash flow, in total. While that may be a result of expenditure for growth, it does make the debt far more risky.
Our View
On the face of it, Minth Group's conversion of EBIT to free cash flow left us tentative about the stock, and its EBIT growth rate was no more enticing than the one empty restaurant on the busiest night of the year. But on the bright side, its interest cover is a good sign, and makes us more optimistic. Looking at the balance sheet and taking into account all these factors, we do believe that debt is making Minth Group stock a bit risky. Some people like that sort of risk, but we're mindful of the potential pitfalls, so we'd probably prefer it carry less debt. 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 1 warning sign for Minth Group 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.
一些人说,作为投资者,考虑风险的最佳方式是波动性,而不是债务,但巴菲特曾说过一句名言:波动性远非风险的同义词。当你考察一家公司的风险有多大时,考虑它的资产负债表是很自然的,因为当一家企业倒闭时,债务往往会涉及到它。与许多其他公司一样敏特集团有限公司(HKG:425)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。
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。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。然而,更常见(但代价仍然高昂)的情况是,一家公司必须以极低的价格发行股票,永久性地稀释股东的股份,只是为了支撑其资产负债表。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Minth Group的最新分析
敏斯集团的债务是什么?
下面的图表显示,Minth Group在2022年6月的债务为82.3亿元人民币,与前一年大致相同。点击查看更多详细信息。然而,它也有46.4亿元现金,因此其净债务为35.8亿元。
联交所:425债转股历史2022年8月29日
看敏思集团的负债情况
从最近的资产负债表可以看出,敏特集团有101亿元的负债在一年内到期,还有32.7亿元的负债在一年内到期。作为对这些债务的抵销,该公司有46.4亿加元的现金以及价值46.2亿加元的应收账款在12个月内到期。因此,它的负债总额比现金和近期应收账款加起来还要多人民币41亿元。
鉴于Minth Group的市值为233亿加元,很难相信这些债务会构成太大威胁。然而,我们确实认为值得关注其资产负债表的实力,因为它可能会随着时间的推移而变化。
我们使用两个主要比率来告知我们债务相对于收益的水平。第一个是净债务除以利息、税项、折旧和摊销前收益(EBITDA),第二个是其息税前收益(EBIT)覆盖其利息支出(或简称利息覆盖)的多少倍。因此,我们考虑债务相对于收益,包括折旧和摊销费用。
我们会说,Minth Group的净债务与EBITDA的比率适中(为2.0),表明在债务方面是谨慎的。其高达利息支出1000倍的息税前利润,意味着债务负担轻如孔雀羽毛。重要的是,Minth Group的息税前利润在过去12个月里下降了48%,令人瞠目结舌。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。当你分析债务时,资产负债表显然是你关注的领域。但最终,未来业务的盈利能力将决定敏特集团能否随着时间的推移加强其资产负债表。所以,如果你关注未来,你可以看看这个免费显示分析师利润预测的报告。
最后,企业需要自由现金流来偿还债务;会计利润只是不能削减这一点。因此,合乎逻辑的一步是看看息税前利润与实际自由现金流相匹配的比例。在过去的三年中,Minth Group的自由现金流总额为大幅负值。尽管这可能是增长支出的结果,但它确实使债务的风险大得多。
我们的观点
从表面上看,Minth Group将EBIT转换为自由现金流让我们对该股持怀疑态度,其EBIT增长率并不比一年中最繁忙的夜晚的一家空餐厅更具诱惑力。但从好的方面来看,它的利息覆盖是一个好兆头,让我们更加乐观。看看资产负债表,并考虑到所有这些因素,我们确实认为债务让Minth Group的股票有点风险。有些人喜欢这种风险,但我们注意到了潜在的陷阱,所以我们可能更喜欢它背负更少的债务。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:我们发现了明斯集团的1个警告标志你应该意识到。
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。