Is Bragg Gaming Group (TSE:BRAG) 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.' 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, Bragg Gaming Group Inc. (TSE:BRAG) does carry debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Bragg Gaming Group's Debt?

As you can see below, at the end of December 2024, Bragg Gaming Group had €6.58m of debt, up from €2.45m a year ago. Click the image for more detail. But on the other hand it also has €10.6m in cash, leading to a €3.99m net cash position.

A Look At Bragg Gaming Group's Liabilities

We can see from the most recent balance sheet that Bragg Gaming Group had liabilities of €29.1m falling due within a year, and liabilities of €3.98m due beyond that. On the other hand, it had cash of €10.6m and €20.1m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by €2.46m.

Given Bragg Gaming Group has a market capitalization of €90.0m, it's hard to believe these liabilities pose much 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, Bragg Gaming Group also has more cash than debt, so we're pretty confident it can manage its debt safely. 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 Bragg Gaming 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.

View our latest analysis for Bragg Gaming Group

In the last year Bragg Gaming Group wasn't profitable at an EBIT level, but managed to grow its revenue by 9.1%, to €102m. We usually like to see faster growth from unprofitable companies, but each to their own.

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 €9.5m. 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. With revenue growth uninspiring, we'd really need to see some positive EBIT before mustering much enthusiasm for this business. For riskier companies like Bragg Gaming Group I always like to keep an eye on whether insiders are buying or selling. So click here if you want to find out for yourself.

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.