Does Optomed Oyj (HEL:OPTOMED) Have A Healthy Balance Sheet?

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. Importantly, Optomed Oyj (HEL:OPTOMED) does carry debt. But the real question is whether this debt is making the company risky.

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. If things get really bad, the lenders can take control of the business. 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, 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.

Our analysis indicates that OPTOMED is potentially undervalued!

What Is Optomed Oyj's Net Debt?

As you can see below, at the end of June 2022, Optomed Oyj had €6.25m of debt, up from €5.78m a year ago. Click the image for more detail. But it also has €7.08m in cash to offset that, meaning it has €825.0k net cash.

A Look At Optomed Oyj's Liabilities

Zooming in on the latest balance sheet data, we can see that Optomed Oyj had liabilities of €5.08m due within 12 months and liabilities of €6.76m due beyond that. On the other hand, it had cash of €7.08m and €5.19m worth of receivables due within a year. So it can boast €435.0k more liquid assets than total liabilities.

Having regard to Optomed Oyj's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the €36.1m company is struggling for cash, we still think it's worth monitoring its balance sheet. Succinctly put, Optomed Oyj boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Optomed Oyj's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Over 12 months, Optomed Oyj made a loss at the EBIT level, and saw its revenue drop to €13m, which is a fall of 17%. That's not what we would hope to see.

So How Risky Is Optomed Oyj?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And in the last year Optomed Oyj had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of €6.1m and booked a €5.5m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of €825.0k. That means it could keep spending at its current rate for more than two years. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that Optomed Oyj is showing 3 warning signs in our investment analysis , you should know about...

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.