Nokian Renkaat Oyj (HEL:TYRES) Is Making Moderate Use Of Debt

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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 Nokian Renkaat Oyj (HEL:TYRES) does use debt in its business. But the real question is whether this debt is making the company risky.

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

When Is Debt A Problem?

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. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Nokian Renkaat Oyj Carry?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Nokian Renkaat Oyj had €865.6m of debt, an increase on €642.8m, over one year. On the flip side, it has €124.9m in cash leading to net debt of about €740.7m.

How Healthy Is Nokian Renkaat Oyj's Balance Sheet?

According to the last reported balance sheet, Nokian Renkaat Oyj had liabilities of €564.9m due within 12 months, and liabilities of €738.8m due beyond 12 months. Offsetting these obligations, it had cash of €124.9m as well as receivables valued at €393.4m due within 12 months. So its liabilities total €785.4m more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of €1.16b, so it does suggest shareholders should keep an eye on Nokian Renkaat Oyj's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Nokian Renkaat Oyj 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.

Check out our latest analysis for Nokian Renkaat Oyj

Over 12 months, Nokian Renkaat Oyj reported revenue of €1.3b, which is a gain of 11%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Over the last twelve months Nokian Renkaat Oyj produced an earnings before interest and tax (EBIT) loss. Indeed, it lost €2.0m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through €164m of cash over the last year. So suffice it to say we consider the stock very risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 2 warning signs with Nokian Renkaat Oyj , and understanding them should be part of your investment process.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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.