Is Ever Harvest Group Holdings (HKG:1549) Using Debt In A Risky Way?
Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Ever Harvest Group Holdings Limited (HKG:1549) does use debt in its business. But is this debt a concern to shareholders?
When Is Debt Dangerous?
Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.
How Much Debt Does Ever Harvest Group Holdings Carry?
You can click the graphic below for the historical numbers, but it shows that as of June 2025 Ever Harvest Group Holdings had HK$46.9m of debt, an increase on HK$43.9m, over one year. However, it does have HK$133.4m in cash offsetting this, leading to net cash of HK$86.5m.
How Strong Is Ever Harvest Group Holdings' Balance Sheet?
We can see from the most recent balance sheet that Ever Harvest Group Holdings had liabilities of HK$140.5m falling due within a year, and liabilities of HK$1.97m due beyond that. On the other hand, it had cash of HK$133.4m and HK$67.5m worth of receivables due within a year. So it actually has HK$58.4m more liquid assets than total liabilities.
This luscious liquidity implies that Ever Harvest Group Holdings' balance sheet is sturdy like a giant sequoia tree. On this view, lenders should feel as safe as the beloved of a black-belt karate master. Simply put, the fact that Ever Harvest Group Holdings has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is Ever Harvest Group Holdings's earnings that will influence how the balance sheet holds up in the future. 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.
Check out our latest analysis for Ever Harvest Group Holdings
Over 12 months, Ever Harvest Group Holdings reported revenue of HK$439m, which is a gain of 18%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.
So How Risky Is Ever Harvest Group Holdings?
Although Ever Harvest Group Holdings had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of HK$7.7m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. To that end, you should learn about the 3 warning signs we've spotted with Ever Harvest Group Holdings (including 1 which shouldn'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.