Is WinWay Technology (TWSE:6515) Financially Strong? An In-Depth Analysis of Its Balance Sheet Health

Howard Marks once said that instead of fretting over market ups and downs, he worries about “the possibility of permanent loss.” This sentiment resonates with many investors. When assessing how risky a company is, debt is a key factor. High levels of debt can lead a company to trouble. WinWay Technology Co., Ltd. (TWSE:6515) does have debt, but the crucial question is whether this is a risk.

Understanding Debt Risks

Debt can fuel growth, but if a company struggles to repay it, the consequences can be dire. If a business can’t meet its debt obligations, shareholders might lose their investment. While rare, this situation can lead to companies diluting shares to raise funds at poor prices. Still, debt isn’t always bad. It can be essential for businesses that require heavy upfront investments. To understand a company’s debt situation, we look at both cash and total debt.

WinWay Technology’s Debt Overview

As of September 2024, WinWay Technology had NT$855.4 million in debt, a rise from NT$150 million last year. However, they also have NT$1.70 billion in cash. This means they effectively have NT$846.9 million in net cash.

Liabilities Breakdown

WinWay Technology’s balance sheet reveals liabilities of NT$1.67 billion due within a year, and an additional NT$932.3 million due after. With NT$1.70 billion in cash and NT$1.96 billion in receivables expected within a year, the company has NT$1.05 billion more in liquid assets than total liabilities.

This suggests a conservative financial position. WinWay Technology can likely handle its debt without much challenge, and with net cash on the books, it seems to be in good shape.

Moreover, WinWay Technology’s earnings before interest and tax (EBIT) grew by 4.1% over the past year, easing any concerns about debt levels. When analyzing debt, the balance sheet is a key focus. However, the company’s future earnings will really determine its financial health. Examining how well it turns EBIT into free cash flow is also important for understanding debt management.

In the last three years, WinWay Technology converted only 14% of its EBIT into free cash flow, which is a bit low. This might make managing and reducing debt a tougher task.

In Conclusion

While it’s wise to examine a company’s debt, WinWay Technology appears stable with NT$846.9 million in net cash and a solid balance sheet. Add in a 4.1% growth in EBIT over the past year, and the outlook is positive. Evaluating debt is crucial, but remember, other risks exist beyond the balance sheet. For instance, WinWay Technology does have one warning sign worth noting.

If you’re looking for businesses that can grow profits without adding debt, consider exploring a list of companies with net cash.

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This article is for informational purposes only. We aim to provide insights based on historical data and analyst projections. It is not financial advice, nor does it recommend buying or selling any stocks. Our focus is long-term analysis grounded in fundamental data. Be aware that our analysis may not include the latest market developments or news from the company. Simply Wall St holds no shares in any of the stocks mentioned.