Is First Sensor (ETR:SIS) A Risky Investment?

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.' 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. As with many other companies First Sensor AG (ETR:SIS) makes use of debt. But the more important question is: how much risk is that debt creating?

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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. If things get really bad, the lenders can take control of the business. 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. 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.

What Is First Sensor's Debt?

You can click the graphic below for the historical numbers, but it shows that First Sensor had €6.15m of debt in June 2025, down from €9.85m, one year before. But it also has €32.8m in cash to offset that, meaning it has €26.6m net cash.

How Strong Is First Sensor's Balance Sheet?

The latest balance sheet data shows that First Sensor had liabilities of €21.2m due within a year, and liabilities of €5.71m falling due after that. On the other hand, it had cash of €32.8m and €11.4m worth of receivables due within a year. So it can boast €17.3m more liquid assets than total liabilities.

This short term liquidity is a sign that First Sensor could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that First Sensor has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since First Sensor will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for First Sensor

In the last year First Sensor had a loss before interest and tax, and actually shrunk its revenue by 16%, to €103m. We would much prefer see growth.

So How Risky Is First Sensor?

While First Sensor lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow €12m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. We'll feel more comfortable with the stock once EBIT is positive, given the lacklustre revenue growth. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 1 warning sign with First Sensor , and understanding them should be part of your investment process.

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.