Is Swoop Holdings (ASX:SWP) Weighed On By Its Debt Load?

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.' 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. Importantly, Swoop Holdings Limited (ASX:SWP) does carry debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest 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.

What Is Swoop Holdings's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Swoop Holdings had AU$16.7m of debt in June 2025, down from AU$23.3m, one year before. On the flip side, it has AU$11.5m in cash leading to net debt of about AU$5.23m.

How Strong Is Swoop Holdings' Balance Sheet?

According to the last reported balance sheet, Swoop Holdings had liabilities of AU$39.7m due within 12 months, and liabilities of AU$25.0m due beyond 12 months. Offsetting these obligations, it had cash of AU$11.5m as well as receivables valued at AU$6.06m due within 12 months. So its liabilities total AU$47.2m more than the combination of its cash and short-term receivables.

Given this deficit is actually higher than the company's market capitalization of AU$32.2m, we think shareholders really should watch Swoop Holdings's debt levels, like a parent watching their child ride a bike for the first time. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Swoop Holdings'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.

View our latest analysis for Swoop Holdings

In the last year Swoop Holdings wasn't profitable at an EBIT level, but managed to grow its revenue by 31%, to AU$106m. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

Despite the top line growth, Swoop Holdings still had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping AU$4.3m. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. It's fair to say the loss of AU$11m didn't encourage us either; we'd like to see a profit. And until that time we think this is a risky stock. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Swoop Holdings has 3 warning signs (and 1 which is a bit concerning) we think 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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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.