Health Check: How Cautiously Does EHang Holdings (NASDAQ: EH) Use Debt?

0

Some say volatility, rather than debt, is the best way to view risk as an investor, but Warren Buffett said “volatility is far from risk.” So it can be obvious that you need to consider debt, when you think about how risky a given stock is, because too much debt can sink a business. We can see that EHang Holdings Limited (NASDAQ: EH) uses debt in its business. But does this debt worry shareholders?

Why Does Debt Bring Risk?

Generally speaking, debt only becomes a real problem when a company cannot repay it easily, either by raising capital or with its own cash flow. An integral part of capitalism is the process of “creative destruction” where bankrupt companies are ruthlessly liquidated by their bankers. However, a more common (but still painful) scenario is that he must raise new equity at low cost, thereby diluting shareholders over the long term. That said, the most common situation is where a business 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 flow and debt together.

Check out our latest review for EHang Holdings

What is the net debt of EHang Holdings?

The image below, which you can click for more details, shows EHang Holdings owed CN 30 million in debt at the end of June 2021, a reduction from CN 41.1 million year-over-year . However, his balance sheet shows that he has CN 406.5 million in cash, so he actually has a net cash of CN 376.5 million.

NasdaqGM: EH History of debt to equity October 9, 2021

How strong is EHang Holdings’ balance sheet?

According to the latest published balance sheet, EHang Holdings had a liability of CNN 124.3 million due within 12 months and CNN 68.4 million liability due beyond 12 months. In return, he had CN 406.5 million in cash and CN 111.8 million in receivables due within 12 months. So he actually CN ¥ 325.6m Following liquid assets as total liabilities.

This short-term liquidity is a sign that EHang Holdings could likely repay its debt with ease, as its balance sheet is far from tight. In short, EHang Holdings has net cash, so it’s fair to say it doesn’t have a lot of debt! There is no doubt that we learn the most about debt from the balance sheet. But it is future earnings, more than anything, that will determine EHang Holdings’ ability to maintain a healthy balance sheet going forward. So if you are focused on the future you can check out this free report showing analysts’ earnings forecasts.

Year over 12 months, EHang Holdings reported revenue of CNN 161 million, a gain of 12%, although it reported no profit before interest and taxes. We generally like to see unprofitable businesses growing faster, but each in their own way.

So how risky is EHang Holdings?

Statistically speaking, businesses that lose money are riskier than those that earn it. And the point is that over the past twelve months, EHang Holdings has lost money in earnings before interest and taxes (EBIT). And during the same period, it recorded a negative free cash outflow of CNN 141 million and recorded a book loss of CN 186 million. While this does make the company a bit risky, it is important to remember that it has a net cash position of CNN 376.5 million. This means that he could continue to spend at his current rate for more than two years. Overall, its balance sheet doesn’t look too risky at the moment, but we are still cautious until we see positive free cash flow. When analyzing debt levels, the balance sheet is the obvious starting point. However, not all investment risks lie on the balance sheet – far from it. Be aware that EHang Holdings shows 2 warning signs in our investment analysis , and 1 of them should not be ignored …

If you are interested in investing in companies that can generate profits without the burden of debt, check out this page. free list of growing companies that have net cash on the balance sheet.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in the mentioned stocks.

Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.


Source link

Leave A Reply

Your email address will not be published.