Is Oncoclínicas do Brasil Serviços Médicos (BVMF:ONCO3) Using Debt In A Risky Way?

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 might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that Oncoclínicas do Brasil Serviços Médicos S.A. (BVMF:ONCO3) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

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 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Oncoclínicas do Brasil Serviços Médicos's Net Debt?

The image below, which you can click on for greater detail, shows that Oncoclínicas do Brasil Serviços Médicos had debt of R$4.39b at the end of September 2025, a reduction from R$5.30b over a year. However, it does have R$473.2m in cash offsetting this, leading to net debt of about R$3.92b.

How Strong Is Oncoclínicas do Brasil Serviços Médicos' Balance Sheet?

According to the last reported balance sheet, Oncoclínicas do Brasil Serviços Médicos had liabilities of R$2.73b due within 12 months, and liabilities of R$4.29b due beyond 12 months. On the other hand, it had cash of R$473.2m and R$1.77b worth of receivables due within a year. So it has liabilities totalling R$4.78b more than its cash and near-term receivables, combined.

The deficiency here weighs heavily on the R$1.17b company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we definitely think shareholders need to watch this one closely. At the end of the day, Oncoclínicas do Brasil Serviços Médicos would probably need a major re-capitalization if its creditors were to demand repayment. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Oncoclínicas do Brasil Serviços Médicos's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for Oncoclínicas do Brasil Serviços Médicos

Over 12 months, Oncoclínicas do Brasil Serviços Médicos made a loss at the EBIT level, and saw its revenue drop to R$5.9b, which is a fall of 2.6%. That's not what we would hope to see.

Caveat Emptor

Over the last twelve months Oncoclínicas do Brasil Serviços Médicos produced an earnings before interest and tax (EBIT) loss. Its EBIT loss was a whopping R$2.0b. If you consider the significant liabilities mentioned above, we are extremely wary of this investment. That said, it is possible that the company will turn its fortunes around. Nevertheless, we would not bet on it given that it vaporized R$506m in cash over the last twelve months, and it doesn't have much by way of liquid assets. So we consider this a high risk stock and we wouldn't be at all surprised if the company asks shareholders for money before long. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 1 warning sign we've spotted with Oncoclínicas do Brasil Serviços Médicos .

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.