Is Horizon Robotics (HKG:9660) A Risky Investment?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. We note that Horizon Robotics (HKG:9660) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. 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.

What Is Horizon Robotics's Debt?

As you can see below, Horizon Robotics had CN¥611.7m of debt at December 2024, down from CN¥39.4b a year prior. But it also has CN¥15.4b in cash to offset that, meaning it has CN¥14.8b net cash.

How Strong Is Horizon Robotics' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Horizon Robotics had liabilities of CN¥1.28b due within 12 months and liabilities of CN¥7.19b due beyond that. Offsetting these obligations, it had cash of CN¥15.4b as well as receivables valued at CN¥686.8m due within 12 months. So it can boast CN¥7.62b more liquid assets than total liabilities.

This surplus suggests that Horizon Robotics has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, Horizon Robotics boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Horizon Robotics's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for Horizon Robotics

Over 12 months, Horizon Robotics reported revenue of CN¥2.4b, which is a gain of 54%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

So How Risky Is Horizon Robotics?

Although Horizon Robotics had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of CN¥2.3b. So taking that on face value, and considering the cash, we don't think its very risky in the near term. Keeping in mind its 54% revenue growth over the last year, we think there's a decent chance the company is on track. We'd see further strong growth as an optimistic indication. 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. Case in point: We've spotted 2 warning signs for Horizon Robotics you should be aware of, and 1 of them can't be ignored.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.