Is Bragg Gaming Group (TSE:BRAG) A Risky Investment?

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. We note that Bragg Gaming Group Inc. (TSE:BRAG) does have debt on its balance sheet. But is this debt a concern to shareholders?

What Risk Does Debt Bring?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. 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.

View our latest analysis for Bragg Gaming Group

What Is Bragg Gaming Group's Debt?

You can click the graphic below for the historical numbers, but it shows that as of December 2022 Bragg Gaming Group had €6.76m of debt, an increase on none, over one year. However, it does have €11.3m in cash offsetting this, leading to net cash of €4.59m.

A Look At Bragg Gaming Group's Liabilities

The latest balance sheet data shows that Bragg Gaming Group had liabilities of €24.3m due within a year, and liabilities of €10.5m falling due after that. Offsetting these obligations, it had cash of €11.3m as well as receivables valued at €16.6m due within 12 months. So it has liabilities totalling €6.88m more than its cash and near-term receivables, combined.

Since publicly traded Bragg Gaming Group shares are worth a total of €67.8m, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, Bragg Gaming Group 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 Bragg Gaming Group'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.

Over 12 months, Bragg Gaming Group reported revenue of €85m, which is a gain of 45%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is Bragg Gaming Group?

While Bragg Gaming Group lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow €4.5m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. The good news for Bragg Gaming Group shareholders is that its revenue growth is strong, making it easier to raise capital if need be. But we still think it's somewhat risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example - Bragg Gaming Group has 2 warning signs we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.