Does Schoeller-Bleckmann Oilfield Equipment (VIE:SBO) Have A Healthy Balance Sheet?

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. As with many other companies Schoeller-Bleckmann Oilfield Equipment Aktiengesellschaft (VIE:SBO) makes use of debt. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for Schoeller-Bleckmann Oilfield Equipment

How Much Debt Does Schoeller-Bleckmann Oilfield Equipment Carry?

The image below, which you can click on for greater detail, shows that at September 2020 Schoeller-Bleckmann Oilfield Equipment had debt of €311.4m, up from €291.9m in one year. However, it does have €322.0m in cash offsetting this, leading to net cash of €10.5m.

A Look At Schoeller-Bleckmann Oilfield Equipment's Liabilities

We can see from the most recent balance sheet that Schoeller-Bleckmann Oilfield Equipment had liabilities of €240.1m falling due within a year, and liabilities of €272.2m due beyond that. Offsetting these obligations, it had cash of €322.0m as well as receivables valued at €66.3m due within 12 months. So it has liabilities totalling €124.0m more than its cash and near-term receivables, combined.

Since publicly traded Schoeller-Bleckmann Oilfield Equipment shares are worth a total of €643.9m, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, Schoeller-Bleckmann Oilfield Equipment also has more cash than debt, so we're pretty confident it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Schoeller-Bleckmann Oilfield Equipment's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year Schoeller-Bleckmann Oilfield Equipment had a loss before interest and tax, and actually shrunk its revenue by 26%, to €336m. To be frank that doesn't bode well.

So How Risky Is Schoeller-Bleckmann Oilfield Equipment?

While Schoeller-Bleckmann Oilfield Equipment lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow €83m. 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. Until we see some positive EBIT, we're a bit cautious of the stock, not least because of the rather modest revenue growth. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. Be aware that Schoeller-Bleckmann Oilfield Equipment is showing 3 warning signs in our investment analysis , you should know about...

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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