We Think B+S Banksysteme (ETR:DTD2) Has A Fair Chunk Of Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that B+S Banksysteme Aktiengesellschaft (ETR:DTD2) does use debt in its business. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. 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. When we examine debt levels, we first consider both cash and debt levels, together.

Check out our latest analysis for B+S Banksysteme

What Is B+S Banksysteme's Debt?

As you can see below, B+S Banksysteme had €1.50m of debt, at December 2020, which is about the same as the year before. You can click the chart for greater detail. However, it also had €285.0k in cash, and so its net debt is €1.22m.

A Look At B+S Banksysteme's Liabilities

The latest balance sheet data shows that B+S Banksysteme had liabilities of €8.12m due within a year, and liabilities of €8.55m falling due after that. On the other hand, it had cash of €285.0k and €5.54m worth of receivables due within a year. So its liabilities total €10.8m more than the combination of its cash and short-term receivables.

This deficit isn't so bad because B+S Banksysteme is worth €20.4m, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if B+S Banksysteme can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year B+S Banksysteme wasn't profitable at an EBIT level, but managed to grow its revenue by 4.1%, to €9.8m. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Over the last twelve months B+S Banksysteme produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at €153k. 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. For example, we would not want to see a repeat of last year's loss of €304k. So we do think this stock is quite risky. 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. Be aware that B+S Banksysteme is showing 2 warning signs in our investment analysis , you should know about...

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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This article by Simply Wall St is general in nature. 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.
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