We Think Smoltek Nanotech Holding (FRA:GY9) Has A Fair Chunk Of Debt

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 Smoltek Nanotech Holding AB (FRA:GY9) does use debt in its business. But the real question is whether this debt is making the company risky.

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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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Smoltek Nanotech Holding's Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Smoltek Nanotech Holding had debt of kr18.1m, up from kr682.0k in one year. On the flip side, it has kr4.72m in cash leading to net debt of about kr13.3m.

A Look At Smoltek Nanotech Holding's Liabilities

The latest balance sheet data shows that Smoltek Nanotech Holding had liabilities of kr14.6m due within a year, and liabilities of kr18.1m falling due after that. On the other hand, it had cash of kr4.72m and kr4.79m worth of receivables due within a year. So it has liabilities totalling kr23.2m more than its cash and near-term receivables, combined.

Of course, Smoltek Nanotech Holding has a market capitalization of kr917.0m, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Carrying virtually no net debt, Smoltek Nanotech Holding has a very light debt load indeed. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Smoltek Nanotech Holding 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 Smoltek Nanotech Holding

In the last year Smoltek Nanotech Holding had a loss before interest and tax, and actually shrunk its revenue by 62%, to kr4.1m. To be frank that doesn't bode well.

Caveat Emptor

While Smoltek Nanotech Holding's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. To be specific the EBIT loss came in at kr35m. 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. However, it doesn't help that it burned through kr36m of cash over the last year. So suffice it to say we do consider the stock to be risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 6 warning signs for Smoltek Nanotech Holding (of which 5 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.