Does TTL Beteiligungs- und Grundbesitz-AG (ETR:TTO) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. We can see that TTL Beteiligungs- und Grundbesitz-AG (ETR:TTO) does use debt in its business. But is this debt a concern to shareholders?

When Is Debt Dangerous?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for TTL Beteiligungs- und Grundbesitz-AG

How Much Debt Does TTL Beteiligungs- und Grundbesitz-AG Carry?

The image below, which you can click on for greater detail, shows that at June 2022 TTL Beteiligungs- und Grundbesitz-AG had debt of €109.9m, up from €97.9m in one year. On the flip side, it has €13.1m in cash leading to net debt of about €96.8m.

How Strong Is TTL Beteiligungs- und Grundbesitz-AG's Balance Sheet?

We can see from the most recent balance sheet that TTL Beteiligungs- und Grundbesitz-AG had liabilities of €992.0k falling due within a year, and liabilities of €109.9m due beyond that. Offsetting these obligations, it had cash of €13.1m as well as receivables valued at €10.0k due within 12 months. So it has liabilities totalling €97.8m more than its cash and near-term receivables, combined.

The deficiency here weighs heavily on the €50.2m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. After all, TTL Beteiligungs- und Grundbesitz-AG would likely require a major re-capitalisation if it had to pay its creditors today. There's no doubt that we learn most about debt from the balance sheet. But it is TTL Beteiligungs- und Grundbesitz-AG'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.

In the last year TTL Beteiligungs- und Grundbesitz-AG wasn't profitable at an EBIT level, but managed to grow its revenue by 32%, to €1.8m. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

Even though TTL Beteiligungs- und Grundbesitz-AG managed to grow its top line quite deftly, the cold hard truth is that it is losing money on the EBIT line. Indeed, it lost €263k at the EBIT level. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. But on the bright side the company actually produced a statutory profit of €1.2m and free cash flow of €567k. So there is definitely a chance that it can improve things in the next few years. 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 7 warning signs for TTL Beteiligungs- und Grundbesitz-AG (of which 3 can't be ignored!) 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.

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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.