LONGi Green Energy Technology Co., Ltd. (SHSE:601012) is a company that uses debt, like many others. However, the key question is whether this debt makes the company risky or not. Debt becomes a problem when a company cannot easily pay it off, leading to potential bankruptcy or shareholder dilution.
At the end of September 2024, LONGi Green Energy Technology had CN¥21.4b of debt, up from CN¥10.6b the previous year. However, the company also had CN¥51.1b in cash, resulting in net cash of CN¥29.8b. Despite liabilities of CN¥63.0b due within 12 months, the company’s sizable market capitalization of CN¥138.7b suggests these liabilities are manageable.
Despite its notable liabilities, LONGi Green Energy Technology boasts net cash, indicating that it does not carry a heavy debt load. However, the company incurred losses in EBIT and experienced negative free cash outflow over the past year, raising concerns about its financial health.
Analyzing debt levels is essential, but investment risk extends beyond the balance sheet. LONGi Green Energy Technology is showing warning signs in terms of financial health, indicating potential risk for investors.
In conclusion, while it’s crucial to consider debt levels, investors should also take into account the broader financial health and profitability of the company. LONGi Green Energy Technology’s current financial situation raises some red flags, highlighting the need for caution when considering investments in the company.
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