Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco (EPA:BAIN) Seems To Use Debt Rather Sparingly

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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, Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco (EPA:BAIN) does carry debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco's Net Debt?

The image below, which you can click on for greater detail, shows that at September 2025 Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco had debt of €31.4m, up from €29.9m in one year. But it also has €244.4m in cash to offset that, meaning it has €213.0m net cash.

How Healthy Is Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco's Balance Sheet?

The latest balance sheet data shows that Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco had liabilities of €415.2m due within a year, and liabilities of €181.3m falling due after that. Offsetting this, it had €244.4m in cash and €102.0m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €250.1m.

Given Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco has a market capitalization of €2.60b, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco

And we also note warmly that Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco grew its EBIT by 11% last year, making its debt load easier to handle. There's no doubt that we learn most about debt from the balance sheet. But it is Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco's earnings that will influence how the balance sheet holds up in the future. 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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last three years, Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco recorded free cash flow worth a fulsome 86% of its EBIT, which is stronger than we'd usually expect. That positions it well to pay down debt if desirable to do so.

Summing Up

We could understand if investors are concerned about Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco's liabilities, but we can be reassured by the fact it has has net cash of €213.0m. The cherry on top was that in converted 86% of that EBIT to free cash flow, bringing in €31m. So is Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco's debt a risk? It doesn't seem so to us. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of Société Anonyme des Bains de Mer et du Cercle des Étrangers à Monaco's earnings per share history for free.

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.