Nasdaq
华尔街日报We Think Want Want China Holdings (HKG:151) Can Stay On Top Of Its Debt
Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. As with many other companies Want Want China Holdings Limited (HKG:151) makes use of debt. But should shareholders be worried about its use of debt?
Why Does Debt Bring Risk?
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. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.
What Is Want Want China Holdings's Debt?
As you can see below, Want Want China Holdings had CN¥4.67b of debt at September 2025, down from CN¥6.33b a year prior. But on the other hand it also has CN¥11.4b in cash, leading to a CN¥6.78b net cash position.
How Healthy Is Want Want China Holdings' Balance Sheet?
Zooming in on the latest balance sheet data, we can see that Want Want China Holdings had liabilities of CN¥8.48b due within 12 months and liabilities of CN¥1.01b due beyond that. Offsetting this, it had CN¥11.4b in cash and CN¥960.1m in receivables that were due within 12 months. So it can boast CN¥2.91b more liquid assets than total liabilities.
This short term liquidity is a sign that Want Want China Holdings could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, Want Want China Holdings boasts net cash, so it's fair to say it does not have a heavy debt load!
See our latest analysis for Want Want China Holdings
But the other side of the story is that Want Want China Holdings saw its EBIT decline by 3.2% over the last year. That sort of decline, if sustained, will obviously make debt harder to handle. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Want Want China Holdings can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.
But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Want Want China Holdings may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the most recent three years, Want Want China Holdings recorded free cash flow worth 71% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.
Summing Up
While we empathize with investors who find debt concerning, you should keep in mind that Want Want China Holdings has net cash of CN¥6.78b, as well as more liquid assets than liabilities. And it impressed us with free cash flow of CN¥3.0b, being 71% of its EBIT. So we don't think Want Want China Holdings's use of debt is risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 1 warning sign for Want Want China Holdings you should be aware of.
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.
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.