Does ÜSTRA Hannoversche Verkehrsbetriebe (FRA:HVB) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that ÜSTRA Hannoversche Verkehrsbetriebe Aktiengesellschaft (FRA:HVB) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is ÜSTRA Hannoversche Verkehrsbetriebe's Net Debt?

You can click the graphic below for the historical numbers, but it shows that ÜSTRA Hannoversche Verkehrsbetriebe had €105.8m of debt in June 2025, down from €119.5m, one year before. However, because it has a cash reserve of €81.9m, its net debt is less, at about €23.9m.

How Healthy Is ÜSTRA Hannoversche Verkehrsbetriebe's Balance Sheet?

We can see from the most recent balance sheet that ÜSTRA Hannoversche Verkehrsbetriebe had liabilities of €96.0m falling due within a year, and liabilities of €207.1m due beyond that. Offsetting this, it had €81.9m in cash and €14.2m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €207.0m.

This deficit is considerable relative to its market capitalization of €249.5m, so it does suggest shareholders should keep an eye on ÜSTRA Hannoversche Verkehrsbetriebe's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. When analysing debt levels, the balance sheet is the obvious place to start. But it is ÜSTRA Hannoversche Verkehrsbetriebe'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.

Check out our latest analysis for ÜSTRA Hannoversche Verkehrsbetriebe

Over 12 months, ÜSTRA Hannoversche Verkehrsbetriebe reported revenue of €171m, which is a gain of 2.9%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months ÜSTRA Hannoversche Verkehrsbetriebe produced an earnings before interest and tax (EBIT) loss. Its EBIT loss was a whopping €82m. 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. Another cause for caution is that is bled €47m in negative free cash flow over the last twelve months. 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. We've identified 3 warning signs with ÜSTRA Hannoversche Verkehrsbetriebe (at least 2 which are significant) , and understanding them should be part of your investment process.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.