Does Nightingale Health Oyj (HEL:HEALTH) Have A Healthy Balance Sheet?

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.' 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. We note that Nightingale Health Oyj (HEL:HEALTH) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. 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. 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.

Check out our latest analysis for Nightingale Health Oyj

How Much Debt Does Nightingale Health Oyj Carry?

You can click the graphic below for the historical numbers, but it shows that Nightingale Health Oyj had €1.49m of debt in December 2023, down from €3.55m, one year before. However, it does have €72.6m in cash offsetting this, leading to net cash of €71.1m.

How Healthy Is Nightingale Health Oyj's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Nightingale Health Oyj had liabilities of €5.21m due within 12 months and liabilities of €1.52m due beyond that. Offsetting this, it had €72.6m in cash and €1.08m in receivables that were due within 12 months. So it can boast €67.0m more liquid assets than total liabilities.

This excess liquidity is a great indication that Nightingale Health Oyj's balance sheet is almost as strong as Fort Knox. Having regard to this fact, we think its balance sheet is as strong as an ox. Simply put, the fact that Nightingale Health Oyj has more cash than debt is arguably a good indication that it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Nightingale Health Oyj's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year Nightingale Health Oyj wasn't profitable at an EBIT level, but managed to grow its revenue by 11%, to €3.7m. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Nightingale Health Oyj?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that Nightingale Health Oyj had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through €11m of cash and made a loss of €18m. While this does make the company a bit risky, it's important to remember it has net cash of €71.1m. That kitty means the company can keep spending for growth for at least two years, at current rates. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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. To that end, you should learn about the 3 warning signs we've spotted with Nightingale Health Oyj (including 1 which is 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.

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.