We think integrated media technology (NASDAQ: IMTE) has a good deal of debt
Berkshire Hathaway’s Charlie Munger-backed external fund manager Li Lu is quick to say this when he says “The biggest risk in investing is not price volatility, but if you will suffer a loss. permanent capital “. It is only natural to consider a company’s balance sheet when considering how risky it is, as debt is often involved when a business collapses. We note that Limited integrated multimedia technology (NASDAQ: IMTE) has debt on its balance sheet. But the most important question is: what risk does this debt create?
Why Does Debt Bring Risk?
Generally speaking, debt only becomes a real problem when a company cannot repay it easily, either by raising capital or with its own cash flow. If things really go wrong, lenders can take over the business. However, a more common (but still costly) situation is where a company has to dilute its shareholders at a cheap share price just to get its debt under control. Of course, the advantage of debt is that it often represents cheap capital, especially when it replaces dilution of a business with the ability to reinvest at high rates of return. When we look at debt levels, we first look at cash and debt levels, together.
Check out our latest review for Integrated Media Technology
How much debt does integrated media technology carry?
As you can see below, Integrated Media Technology was in debt of A $ 4.13 million in June 2021, up from A $ 6.86 million the year before. However, he also had AU $ 4.00 million in cash, so his net debt is AU $ 132.3,000.
How healthy is Integrated Media Technology’s balance sheet?
According to the latest published balance sheet, Integrated Media Technology had liabilities of AU $ 8.03 million due within 12 months and liabilities of AU $ 3.55 million due beyond 12 months. In compensation for these obligations, it had cash of AU $ 4.00 million as well as receivables valued at AU $ 1.10 million maturing within 12 months. As a result, its liabilities exceed the sum of its cash and (short-term) receivables by AU $ 6.48 million.
Given that the listed Integrated Media Technology shares are worth a total of A $ 62.9 million, it seems unlikely that this level of liabilities is a major threat. But there are enough liabilities that we would certainly recommend that shareholders continue to monitor the balance sheet going forward. But in any case, Integrated Media Technology has virtually no net debt, so it’s fair to say that it doesn’t have heavy debt! There is no doubt that we learn the most about debt from the balance sheet. But you can’t look at debt in isolation; since Integrated Media Technology will need revenue to repay this debt. So, when considering debt, it is really worth looking at the profit trend. Click here for an interactive snapshot.
Year over 12 months, Integrated Media Technology recorded a loss in EBIT and saw its revenue fall to AU $ 1.3 million, a decrease of 5.6%. This is not what we hope to see.
Importantly, Integrated Media Technology recorded a loss of earnings before interest and taxes (EBIT) over the past year. Indeed, it lost AU $ 5.0 million in EBIT. When we look at this and recall the liabilities on its balance sheet, versus the cash flow, it seems unwise to us that the company has debt. Quite frankly, we think the record is far from up to par, although it could improve over time. However, it doesn’t help that he spent A $ 21million in cash in the past year. In short, it’s a really risky title. There is no doubt that we learn the most about debt from the balance sheet. But at the end of the day, every business can contain risks that exist off the balance sheet. For example, Integrated Media Technology has 7 warning signs (and 4 that make us uncomfortable) we think you should know about.
At the end of the day, it’s often best to focus on businesses that don’t have net debt. You can access our special list of these companies (all with a history of profit growth). It’s free.
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