Is One Experience Société anonyme (EPA:ALEXP) Using Debt Sensibly?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, '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 One Experience Société anonyme (EPA:ALEXP) does use debt in its business. But the real question is whether this debt is making the company risky.

When Is Debt Dangerous?

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. 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. 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 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 One Experience Société anonyme

How Much Debt Does One Experience Société anonyme Carry?

You can click the graphic below for the historical numbers, but it shows that as of December 2023 One Experience Société anonyme had €4.12m of debt, an increase on €3.79m, over one year. On the flip side, it has €886.0k in cash leading to net debt of about €3.23m.

How Strong Is One Experience Société anonyme's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that One Experience Société anonyme had liabilities of €9.16m due within 12 months and no liabilities due beyond that. On the other hand, it had cash of €886.0k and €2.18m worth of receivables due within a year. So it has liabilities totalling €6.09m more than its cash and near-term receivables, combined.

This deficit casts a shadow over the €3.96m company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. At the end of the day, One Experience Société anonyme would probably need a major re-capitalization if its creditors were to demand repayment. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since One Experience Société anonyme will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

In the last year One Experience Société anonyme wasn't profitable at an EBIT level, but managed to grow its revenue by 68%, to €5.2m. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Even though One Experience Société anonyme managed to grow its top line quite deftly, the cold hard truth is that it is losing money on the EBIT line. Indeed, it lost a very considerable €561k at the EBIT level. Considering that alongside the liabilities mentioned above make us nervous about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it burned through €465k in negative free cash flow over the last year. So suffice it to say we consider the stock to be risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 4 warning signs for One Experience Société anonyme (of which 3 are concerning!) you should know about.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.