Is Agripower France Société Anonyme (EPA:ALAGP) Weighed On By Its Debt Load?

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 might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that Agripower France Société Anonyme (EPA:ALAGP) does use debt in its business. But is this debt a concern to shareholders?

We've discovered 3 warning signs about Agripower France Société Anonyme. View them for free.

Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. If things get really bad, the lenders can take control of the business. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Agripower France Société Anonyme's Debt?

The image below, which you can click on for greater detail, shows that Agripower France Société Anonyme had debt of €2.67m at the end of December 2024, a reduction from €3.15m over a year. But on the other hand it also has €4.32m in cash, leading to a €1.64m net cash position.

How Strong Is Agripower France Société Anonyme's Balance Sheet?

We can see from the most recent balance sheet that Agripower France Société Anonyme had liabilities of €5.66m falling due within a year, and liabilities of €167.1k due beyond that. Offsetting these obligations, it had cash of €4.32m as well as receivables valued at €2.05m due within 12 months. So it actually has €531.9k more liquid assets than total liabilities.

This surplus suggests that Agripower France Société Anonyme has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Agripower France Société Anonyme has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is Agripower France Société Anonyme'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 Agripower France Société Anonyme

Over 12 months, Agripower France Société Anonyme made a loss at the EBIT level, and saw its revenue drop to €1.6m, which is a fall of 44%. That makes us nervous, to say the least.

So How Risky Is Agripower France Société Anonyme?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months Agripower France Société Anonyme lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of €197k and booked a €3.1m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of €1.64m. That means it could keep spending at its current rate for more than two years. 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. The balance sheet is clearly the area to focus on when you are analysing debt. 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 3 warning signs for Agripower France Société Anonyme (of which 2 make us uncomfortable!) 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.