JS Global Lifestyle (HKG:1691) Has Debt But No Earnings; Should You Worry?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. We can see that JS Global Lifestyle Company Limited (HKG:1691) does use debt in its business. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

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 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. When we think about a company's use of debt, we first look at cash and debt together.

What Is JS Global Lifestyle's Debt?

As you can see below, at the end of June 2025, JS Global Lifestyle had US$48.8m of debt, up from none a year ago. Click the image for more detail. However, its balance sheet shows it holds US$555.9m in cash, so it actually has US$507.0m net cash.

How Healthy Is JS Global Lifestyle's Balance Sheet?

We can see from the most recent balance sheet that JS Global Lifestyle had liabilities of US$814.8m falling due within a year, and liabilities of US$13.8m due beyond that. On the other hand, it had cash of US$555.9m and US$390.4m worth of receivables due within a year. So it can boast US$117.7m more liquid assets than total liabilities.

This short term liquidity is a sign that JS Global Lifestyle could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, JS Global Lifestyle boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if JS Global Lifestyle 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.

Check out our latest analysis for JS Global Lifestyle

In the last year JS Global Lifestyle's revenue was pretty flat, and it made a negative EBIT. While that's not too bad, we'd prefer see growth.

So How Risky Is JS Global Lifestyle?

While JS Global Lifestyle lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$28m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. When I consider a company to be a bit risky, I think it is responsible to check out whether insiders have been reporting any share sales. Luckily, you can click here ito see our graphic depicting JS Global Lifestyle insider transactions.

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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