Is Trip.com Group (NASDAQ:TCOM) Using Too Much Debt?

Yahoo

08-05-2025

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 Trip.com Group Limited (NASDAQ:TCOM) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?
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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.
As you can see below, Trip.com Group had CN¥39.6b of debt at December 2024, down from CN¥45.0b a year prior. However, it does have CN¥76.9b in cash offsetting this, leading to net cash of CN¥37.3b.
Zooming in on the latest balance sheet data, we can see that Trip.com Group had liabilities of CN¥74.0b due within 12 months and liabilities of CN¥25.1b due beyond that. On the other hand, it had cash of CN¥76.9b and CN¥21.8b worth of receivables due within a year. So these liquid assets roughly match the total liabilities.
Having regard to Trip.com Group's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the CN¥289.1b company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, Trip.com Group also has more cash than debt, so we're pretty confident it can manage its debt safely.
See our latest analysis for Trip.com Group
Another good sign is that Trip.com Group has been able to increase its EBIT by 25% in twelve months, making it easier to pay down debt. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Trip.com Group can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Trip.com Group has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Happily for any shareholders, Trip.com Group actually produced more free cash flow than EBIT over the last three years. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.
We could understand if investors are concerned about Trip.com Group's liabilities, but we can be reassured by the fact it has has net cash of CN¥37.3b. And it impressed us with free cash flow of CN¥19b, being 166% of its EBIT. So is Trip.com Group's debt a risk? It doesn't seem so to us. Over time, share prices tend to follow earnings per share, so if you're interested in Trip.com Group, you may well want to click here to check an interactive graph of its earnings per share history.
If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.
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