Does InvesTech Holdings (HKG:1087) Have A Healthy Balance Sheet?

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 might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that InvesTech Holdings Limited (HKG:1087) does use debt in its business. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is InvesTech Holdings's Net Debt?

The image below, which you can click on for greater detail, shows that InvesTech Holdings had debt of CN¥217.0m at the end of June 2025, a reduction from CN¥232.0m over a year. However, because it has a cash reserve of CN¥32.7m, its net debt is less, at about CN¥184.4m.

A Look At InvesTech Holdings' Liabilities

Zooming in on the latest balance sheet data, we can see that InvesTech Holdings had liabilities of CN¥473.5m due within 12 months and liabilities of CN¥12.3m due beyond that. Offsetting this, it had CN¥32.7m in cash and CN¥343.9m in receivables that were due within 12 months. So it has liabilities totalling CN¥109.2m more than its cash and near-term receivables, combined.

InvesTech Holdings has a market capitalization of CN¥187.5m, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since InvesTech Holdings will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

View our latest analysis for InvesTech Holdings

In the last year InvesTech Holdings had a loss before interest and tax, and actually shrunk its revenue by 7.7%, to CN¥486m. That's not what we would hope to see.

Caveat Emptor

Importantly, InvesTech Holdings had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping CN¥24m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through CN¥7.4m of cash over the last year. So to be blunt we think it is risky. 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. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for InvesTech Holdings (of which 1 is potentially serious!) 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.

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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.