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.
傳奇基金經理理想汽車·盧曾説，最大的投資風險不是價格的波動，而是你是否會遭受永久性的資本損失。當我們考慮一家公司的風險有多大時，我們總是喜歡看它對債務的使用，因為債務過重可能導致破產。重要的是東蘇光電科技有限公司。(SZSE：200413)確實有債務。但真正的問題是，這筆債務是否讓該公司面臨風險。
債務會帶來什麼風險？
債務幫助企業，直到企業難以償還債務，無論是用新資本還是用自由現金流。如果情況真的變得很糟糕，貸款人可以控制業務。儘管這並不常見，但我們確實經常看到負債累累的公司永久性地稀釋股東的權益，因為貸款人迫使他們以令人沮喪的價格籌集資金。當然，在企業中，債務可以是一個重要的工具，特別是資本密集型企業。當我們考慮一家公司的債務用途時，我們首先會把現金和債務放在一起看。
查看我們對東旭光電科技的最新分析
東旭光電的債務是什麼？
如下所示，截至2022年3月底，東旭光電科技的債務為219億加元，高於一年前的207億加元。單擊圖像瞭解更多詳細信息。然而，它也有92.4億元現金，因此其淨債務為127億元。
深交所：200413債轉股歷史2022年7月12日
看東旭光電科技的負債狀況
放大最新的資產負債表數據可以看到，東旭光電有337億元的負債在12個月內到期，31.8億元的負債在12個月內到期。作為抵消，它有92.4億加元的現金和116億加元的應收賬款在12個月內到期。因此，其負債總額為人民幣160億元，比現金和短期應收賬款之和還要多。
這一赤字給這家105億元人民幣的公司蒙上了一層陰影，就像一個龐然大物聳立在凡人之上。因此，毫無疑問，我們會密切關注它的資產負債表。畢竟，如果東旭光電科技今天不得不償還債權人的債務，它很可能需要進行一次重大的資本重組。在分析債務水平時，資產負債表顯然是一個起點。但影響未來資產負債表表現的將是東旭光電的盈利情況。因此，當考慮債務時，絕對值得關注收益趨勢。點擊此處查看互動快照。
12個月來，東旭光電在息税前利潤層面出現虧損，收入下降至58億加元，降幅為20%。至少可以説，這讓我們感到緊張。
告誡買入者
雖然東旭光電不斷下滑的營收令人心碎，但可以説，其息税前利潤(EBIT)虧損就更沒有吸引力了。其息税前利潤損失高達人民幣16億元。考慮到上面提到的債務，讓我們對公司感到緊張。它需要迅速改善運營，才能讓我們對它感興趣。例如，我們不希望看到去年虧損29億元的情況重演。在此之前，我們認為這是一隻高風險的股票。在分析債務水平時，資產負債表顯然是一個起點。然而，並非所有投資風險都存在於資產負債表中--遠非如此。例如，我們發現東旭光電科技的2個警示標誌(1不應該被忽視！)在這裏投資之前你應該意識到這一點。
歸根結底，關注那些沒有淨債務的公司往往更好。你可以訪問我們的這類公司的特別名單(都有利潤增長的記錄)。這是免費的。
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本文由Simply Wall St.撰寫，具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論，我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議，也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意，我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。
