Is Feintool International Holding (VTX:FTON) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. As with many other companies Feintool International Holding AG (VTX:FTON) makes use of debt. But the real question is whether this debt is making the company risky.

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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. If things get really bad, the lenders can take control of the business. 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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Feintool International Holding Carry?

As you can see below, at the end of December 2024, Feintool International Holding had CHF92.2m of debt, up from CHF79.9m a year ago. Click the image for more detail. However, because it has a cash reserve of CHF77.1m, its net debt is less, at about CHF15.1m.

A Look At Feintool International Holding's Liabilities

The latest balance sheet data shows that Feintool International Holding had liabilities of CHF193.0m due within a year, and liabilities of CHF166.0m falling due after that. On the other hand, it had cash of CHF77.1m and CHF103.9m worth of receivables due within a year. So it has liabilities totalling CHF178.2m more than its cash and near-term receivables, combined.

When you consider that this deficiency exceeds the company's CHF149.5m market capitalization, you might well be inclined to review the balance sheet intently. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price. 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 Feintool International Holding'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.

Check out our latest analysis for Feintool International Holding

In the last year Feintool International Holding had a loss before interest and tax, and actually shrunk its revenue by 15%, to CHF720m. We would much prefer see growth.

Caveat Emptor

Not only did Feintool International Holding's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Its EBIT loss was a whopping CHF40m. Considering that alongside the liabilities mentioned above make us nervous about the company. It would need to improve its operations quickly for us to be interested in it. For example, we would not want to see a repeat of last year's loss of CHF45m. In the meantime, we consider the stock to be 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 - Feintool International Holding has 1 warning sign we think you should be aware of.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.