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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. As with many other companies Guangdong Provincial Expressway Development Co., Ltd. (SZSE:200429) makes use of debt. But should shareholders be worried about its use of debt?
When Is Debt Dangerous?
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.
See our latest analysis for Guangdong Provincial Expressway Development
How Much Debt Does Guangdong Provincial Expressway Development Carry?
The image below, which you can click on for greater detail, shows that Guangdong Provincial Expressway Development had debt of CN¥6.72b at the end of June 2022, a reduction from CN¥7.65b over a year. However, it does have CN¥4.05b in cash offsetting this, leading to net debt of about CN¥2.67b.
![debt-equity-history-analysis](https://usnewsfile.futunn.com/pic/0-15069332-0-03339b72e8450655c9d491092b22c987.png/big)
SZSE:200429 Debt to Equity History September 27th 2022
A Look At Guangdong Provincial Expressway Development's Liabilities
According to the last reported balance sheet, Guangdong Provincial Expressway Development had liabilities of CN¥2.54b due within 12 months, and liabilities of CN¥6.32b due beyond 12 months. Offsetting this, it had CN¥4.05b in cash and CN¥134.6m in receivables that were due within 12 months. So it has liabilities totalling CN¥4.67b more than its cash and near-term receivables, combined.
This deficit isn't so bad because Guangdong Provincial Expressway Development is worth CN¥14.2b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt.
We measure a company's debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.
Guangdong Provincial Expressway Development has a low debt to EBITDA ratio of only 0.68. But the really cool thing is that it actually managed to receive more interest than it paid, over the last year. So it's fair to say it can handle debt like a hotshot teppanyaki chef handles cooking. But the other side of the story is that Guangdong Provincial Expressway Development saw its EBIT decline by 9.2% over the last year. If earnings continue to decline at that rate the company may have increasing difficulty managing its debt load. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Guangdong Provincial Expressway Development'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, a company can only pay off debt with cold hard cash, not accounting profits. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. During the last three years, Guangdong Provincial Expressway Development generated free cash flow amounting to a very robust 98% of its EBIT, more than we'd expect. That puts it in a very strong position to pay down debt.
Our View
Happily, Guangdong Provincial Expressway Development's impressive interest cover implies it has the upper hand on its debt. But, on a more sombre note, we are a little concerned by its EBIT growth rate. It's also worth noting that Guangdong Provincial Expressway Development is in the Infrastructure industry, which is often considered to be quite defensive. Taking all this data into account, it seems to us that Guangdong Provincial Expressway Development takes a pretty sensible approach to debt. While that brings some risk, it can also enhance returns for shareholders. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Guangdong Provincial Expressway Development you should know about.
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.
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.
马克斯说得很好,他不是担心股价波动,而是我担心的是永久亏损的可能性……我认识的每个实际投资者都担心。因此,当你评估一家公司的风险有多大时,聪明的投资者似乎知道债务--通常涉及破产--是一个非常重要的因素。与许多其他公司一样广东省高速公路发展有限公司。(SZSE:200429)利用债务。但股东是否应该担心它的债务使用情况?
债务在什么时候是危险的?
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。
查看我们对广东省高速公路发展的最新分析
广东省高速公路发展背负着多少债务?
下图显示,截至2022年6月底,广东省高速公路发展有限公司的债务为67.2亿加元,较一年内的76.5亿加元有所减少。然而,它确实有40.5亿加元的现金来抵消这一点,导致净债务约为26.7亿加元。
![debt-equity-history-analysis](https://usnewsfile.futunn.com/pic/0-15069332-0-03339b72e8450655c9d491092b22c987.png/big)
深圳证交所:200429债转股历史2022年9月27日
关于广东省高速公路发展负债的思考
根据最新上报的资产负债表,广东省高速公路发展公司有25.4亿元人民币的负债在12个月内到期,63.2亿元的负债在12个月后到期。作为抵消,它有40.5亿加元的现金和1.346亿加元的应收账款在12个月内到期。因此,该公司的负债总额为人民币46.7亿元,超过了现金和近期应收账款的总和。
这一赤字并不是那么糟糕,因为广东省高速公路发展公司价值人民币142亿元,因此如果需要的话,可能会筹集到足够的资本来支撑其资产负债表。然而,仍值得密切关注其偿债能力。
我们通过查看公司的净债务除以利息、税项、折旧和摊销前收益(EBITDA),并计算其息税前收益(EBIT)覆盖利息支出(利息覆盖)的容易程度,来衡量公司的债务负担与其盈利能力的关系。这样,我们既考虑了债务的绝对量,也考虑了为其支付的利率。
广东省高速公路发展的债务与EBITDA之比较低,仅为0.68。但真正酷的是,在过去的一年里,它实际上设法获得了比支付更多的利息。因此,公平地说,它可以处理债务,就像一位铁板烧大厨处理烹饪一样。但另一方面,广东省高速公路发展有限公司去年的息税前利润下降了9.2%。如果收益继续以这样的速度下降,该公司管理债务负担的难度可能会越来越大。在分析债务水平时,资产负债表显然是一个起点。但最重要的是,未来的收益将决定广东省高速公路发展公司未来保持健康资产负债表的能力。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,一家公司只能用冷硬现金偿还债务,而不是会计利润。因此,我们显然需要看看息税前利润是否会带来相应的自由现金流。在过去三年中,广东省高速公路发展有限公司产生了相当强劲的自由现金流,占其息税前利润的98%,超出了我们的预期。这使其在偿还债务方面处于非常有利的地位。
我们的观点
令人高兴的是,广东省高速公路发展公司令人印象深刻的利息覆盖意味着它在债务上占据了上风。但是,更悲观的是,我们对其息税前利润的增长率感到有点担忧。同样值得注意的是,广东省高速公路发展属于基础设施行业,这一行业通常被认为是相当防御性的。考虑到所有这些数据,在我们看来,广东省高速公路发展公司对债务采取了相当明智的做法。虽然这会带来一些风险,但也可以提高股东的回报。当你分析债务时,资产负债表显然是你关注的领域。但归根结底,每家公司都可能包含存在于资产负债表之外的风险。这些风险可能很难发现。每家公司都有它们,我们已经发现广东省高速公路发展的一块警示牌你应该知道。
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。
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。