Does Jungfraubahn Holding (VTX:JFN) Have A Healthy Balance Sheet?

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 Jungfraubahn Holding AG (VTX:JFN) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

View our latest analysis for Jungfraubahn Holding

What Is Jungfraubahn Holding's Net Debt?

The image below, which you can click on for greater detail, shows that at December 2020 Jungfraubahn Holding had debt of CHF109.3m, up from CHF51.1m in one year. However, it also had CHF20.0m in cash, and so its net debt is CHF89.2m.

How Strong Is Jungfraubahn Holding's Balance Sheet?

We can see from the most recent balance sheet that Jungfraubahn Holding had liabilities of CHF120.0m falling due within a year, and liabilities of CHF101.7m due beyond that. Offsetting this, it had CHF20.0m in cash and CHF18.2m in receivables that were due within 12 months. So its liabilities total CHF183.5m more than the combination of its cash and short-term receivables.

While this might seem like a lot, it is not so bad since Jungfraubahn Holding has a market capitalization of CHF802.3m, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. 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 Jungfraubahn Holding'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, Jungfraubahn Holding made a loss at the EBIT level, and saw its revenue drop to CHF126m, which is a fall of 44%. To be frank that doesn't bode well.

Caveat Emptor

Not only did Jungfraubahn Holding's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). To be specific the EBIT loss came in at CHF11m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled CHF93m in negative free cash flow over the last twelve months. So in short it's a really risky stock. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how Jungfraubahn Holding's profit, revenue, and operating cashflow have changed over the last few years.

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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