Is Freetech Road Recycling Technology (Holdings) (HKG:6888) Using Too Much Debt?

Warren Buffett famously said, '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 note that Freetech Road Recycling Technology (Holdings) Limited (HKG:6888) does have debt on its balance sheet. But is this debt a concern to shareholders?

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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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Freetech Road Recycling Technology (Holdings)'s Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Freetech Road Recycling Technology (Holdings) had HK$124.8m of debt, an increase on HK$97.8m, over one year. But it also has HK$230.9m in cash to offset that, meaning it has HK$106.1m net cash.

How Strong Is Freetech Road Recycling Technology (Holdings)'s Balance Sheet?

According to the last reported balance sheet, Freetech Road Recycling Technology (Holdings) had liabilities of HK$225.6m due within 12 months, and liabilities of HK$19.9m due beyond 12 months. Offsetting these obligations, it had cash of HK$230.9m as well as receivables valued at HK$264.8m due within 12 months. So it actually has HK$250.3m more liquid assets than total liabilities.

This surplus liquidity suggests that Freetech Road Recycling Technology (Holdings)'s balance sheet could take a hit just as well as Homer Simpson's head can take a punch. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, Freetech Road Recycling Technology (Holdings) 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 you can't view debt in total isolation; since Freetech Road Recycling Technology (Holdings) will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Freetech Road Recycling Technology (Holdings)

In the last year Freetech Road Recycling Technology (Holdings) wasn't profitable at an EBIT level, but managed to grow its revenue by 112%, to HK$200m. So its pretty obvious shareholders are hoping for more growth!

So How Risky Is Freetech Road Recycling Technology (Holdings)?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Freetech Road Recycling Technology (Holdings) had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through HK$59m of cash and made a loss of HK$2.9m. But the saving grace is the HK$106.1m on the balance sheet. That kitty means the company can keep spending for growth for at least two years, at current rates. Importantly, Freetech Road Recycling Technology (Holdings)'s revenue growth is hot to trot. While unprofitable companies can be risky, they can also grow hard and fast in those pre-profit years. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Freetech Road Recycling Technology (Holdings) has 2 warning signs (and 1 which can't be ignored) we think you should know about.

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.