ISP Global (HKG:8487) Has Debt But No Earnings; Should You Worry?

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.' 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 ISP Global Limited (HKG:8487) 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 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. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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 ISP Global's Debt?

The image below, which you can click on for greater detail, shows that ISP Global had debt of CN¥41.3m at the end of June 2025, a reduction from CN¥78.2m over a year. But it also has CN¥58.7m in cash to offset that, meaning it has CN¥17.4m net cash.

How Healthy Is ISP Global's Balance Sheet?

The latest balance sheet data shows that ISP Global had liabilities of CN¥57.1m due within a year, and liabilities of CN¥18.8m falling due after that. Offsetting these obligations, it had cash of CN¥58.7m as well as receivables valued at CN¥19.9m due within 12 months. So it actually has CN¥2.76m more liquid assets than total liabilities.

This surplus suggests that ISP Global has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that ISP Global has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is ISP Global's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for ISP Global

In the last year ISP Global wasn't profitable at an EBIT level, but managed to grow its revenue by 6.0%, to CN¥232m. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is ISP Global?

While ISP Global lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow CN¥52m. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example ISP Global has 3 warning signs (and 2 which shouldn'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.