Ennogie Solar Group (CPH:ESG) Is Carrying A Fair Bit Of Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Ennogie Solar Group A/S (CPH:ESG) does use debt in its business. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Ennogie Solar Group Carry?

As you can see below, at the end of June 2025, Ennogie Solar Group had kr.21.4m of debt, up from kr.16.3m a year ago. Click the image for more detail. However, because it has a cash reserve of kr.1.51m, its net debt is less, at about kr.19.9m.

A Look At Ennogie Solar Group's Liabilities

We can see from the most recent balance sheet that Ennogie Solar Group had liabilities of kr.35.2m falling due within a year, and liabilities of kr.14.1m due beyond that. Offsetting these obligations, it had cash of kr.1.51m as well as receivables valued at kr.13.5m due within 12 months. So its liabilities total kr.34.3m more than the combination of its cash and short-term receivables.

While this might seem like a lot, it is not so bad since Ennogie Solar Group has a market capitalization of kr.148.0m, and so it could probably strengthen its balance sheet by raising capital if it needed to. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. There's no doubt that we learn most about debt from the balance sheet. But it is Ennogie Solar Group's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Ennogie Solar Group

In the last year Ennogie Solar Group had a loss before interest and tax, and actually shrunk its revenue by 44%, to kr.39m. That makes us nervous, to say the least.

Caveat Emptor

While Ennogie Solar Group's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Indeed, it lost kr.12m at the EBIT level. 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. However, it doesn't help that it burned through kr.4.4m of cash over the last year. So to be blunt we think it is risky. 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. To that end, you should learn about the 3 warning signs we've spotted with Ennogie Solar Group (including 2 which are potentially serious) .

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.