Would SYZYGY (ETR:SYZ) Be Better Off With Less Debt?

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.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies SYZYGY AG (ETR:SYZ) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does SYZYGY Carry?

As you can see below, at the end of March 2025, SYZYGY had €2.00m of debt, up from none a year ago. Click the image for more detail. However, because it has a cash reserve of €1.40m, its net debt is less, at about €597.0k.

A Look At SYZYGY's Liabilities

The latest balance sheet data shows that SYZYGY had liabilities of €17.8m due within a year, and liabilities of €14.4m falling due after that. Offsetting this, it had €1.40m in cash and €11.5m in receivables that were due within 12 months. So it has liabilities totalling €19.3m more than its cash and near-term receivables, combined.

This deficit is considerable relative to its market capitalization of €30.0m, so it does suggest shareholders should keep an eye on SYZYGY's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. 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 SYZYGY'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.

Check out our latest analysis for SYZYGY

Over 12 months, SYZYGY made a loss at the EBIT level, and saw its revenue drop to €67m, which is a fall of 5.3%. We would much prefer see growth.

Caveat Emptor

Importantly, SYZYGY had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping €13m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. For example, we would not want to see a repeat of last year's loss of €14m. So in short it's a really risky stock. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 1 warning sign for SYZYGY that you should be aware of before investing here.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.