Is Bodegas Riojanas (BME:RIO) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. Importantly, Bodegas Riojanas, S.A. (BME:RIO) does carry debt. But is this debt a concern to shareholders?

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Bodegas Riojanas Carry?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Bodegas Riojanas had €26.2m of debt, an increase on €22.3m, over one year. And it doesn't have much cash, so its net debt is about the same.

A Look At Bodegas Riojanas' Liabilities

According to the last reported balance sheet, Bodegas Riojanas had liabilities of €18.5m due within 12 months, and liabilities of €17.9m due beyond 12 months. On the other hand, it had cash of €408.0k and €4.70m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by €31.4m.

This deficit casts a shadow over the €12.3m company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. After all, Bodegas Riojanas would likely require a major re-capitalisation if it had to pay its creditors today. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Bodegas Riojanas'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.

Check out our latest analysis for Bodegas Riojanas

Over 12 months, Bodegas Riojanas made a loss at the EBIT level, and saw its revenue drop to €15m, which is a fall of 7.3%. We would much prefer see growth.

Caveat Emptor

Over the last twelve months Bodegas Riojanas produced an earnings before interest and tax (EBIT) loss. Its EBIT loss was a whopping €1.4m. Combining this information with the significant liabilities we already touched on makes us very hesitant about this stock, to say the least. That said, it is possible that the company will turn its fortunes around. Nevertheless, we would not bet on it given that it vaporized €3.2m in cash over the last twelve months, and it doesn't have much by way of liquid assets. So we consider this a high risk stock and we wouldn't be at all surprised if the company asks shareholders for money before long. 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. These risks can be hard to spot. Every company has them, and we've spotted 4 warning signs for Bodegas Riojanas (of which 2 are potentially serious!) you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.