Is Admicasa Holding (BRN:ADMI) 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.' 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. Importantly, Admicasa Holding AG (BRN:ADMI) does carry debt. But the real question is whether this debt is making the company risky.

What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

Check out our latest analysis for Admicasa Holding

How Much Debt Does Admicasa Holding Carry?

The image below, which you can click on for greater detail, shows that Admicasa Holding had debt of CHF2.70m at the end of June 2024, a reduction from CHF4.00m over a year. However, its balance sheet shows it holds CHF5.24m in cash, so it actually has CHF2.54m net cash.

A Look At Admicasa Holding's Liabilities

The latest balance sheet data shows that Admicasa Holding had liabilities of CHF6.26m due within a year, and liabilities of CHF2.14m falling due after that. On the other hand, it had cash of CHF5.24m and CHF3.02m worth of receivables due within a year. So its total liabilities are just about perfectly matched by its shorter-term, liquid assets.

Having regard to Admicasa Holding's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the CHF13.3m company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, Admicasa Holding also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is Admicasa Holding's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

While it hasn't made a profit, at least Admicasa Holding booked its first revenue as a publicly listed company, in the last twelve months.

So How Risky Is Admicasa Holding?

Although Admicasa Holding had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of CHF780k. 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. One positive is that Admicasa Holding is growing revenue apace, which makes it easier to sell a growth story and raise capital if need be. But we still think it's somewhat risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Admicasa Holding (of which 2 are concerning!) 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.

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.