Would AS Modera (TAL:MODE) Be Better Off With Less Debt?

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 can see that AS Modera (TAL:MODE) does use debt in its business. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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, 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 AS Modera Carry?

The image below, which you can click on for greater detail, shows that at June 2025 AS Modera had debt of €1.69m, up from €467.9k in one year. However, it does have €1.03m in cash offsetting this, leading to net debt of about €661.4k.

How Strong Is AS Modera's Balance Sheet?

We can see from the most recent balance sheet that AS Modera had liabilities of €609.3k falling due within a year, and liabilities of €1.63m due beyond that. Offsetting this, it had €1.03m in cash and €224.1k in receivables that were due within 12 months. So its liabilities total €978.4k more than the combination of its cash and short-term receivables.

Since publicly traded AS Modera shares are worth a total of €8.73m, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. When analysing debt levels, the balance sheet is the obvious place to start. But it is AS Modera'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.

View our latest analysis for AS Modera

In the last year AS Modera had a loss before interest and tax, and actually shrunk its revenue by 5.5%, to €3.6m. That's not what we would hope to see.

Caveat Emptor

Over the last twelve months AS Modera produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at €77k. 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 €544k in negative free cash flow over the last twelve months. So in short it's a really risky stock. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 4 warning signs for AS Modera (1 is significant!) that you should be aware of before investing here.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.