Here's Why Crossject Société Anonyme (EPA:ALCJ) Can Afford Some Debt

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. We note that Crossject Société Anonyme (EPA:ALCJ) does have debt on its balance sheet. But is this debt a concern to shareholders?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

See our latest analysis for Crossject Société Anonyme

What Is Crossject Société Anonyme's Debt?

You can click the graphic below for the historical numbers, but it shows that Crossject Société Anonyme had €14.1m of debt in December 2022, down from €23.3m, one year before. However, it does have €7.77m in cash offsetting this, leading to net debt of about €6.36m.

A Look At Crossject Société Anonyme's Liabilities

We can see from the most recent balance sheet that Crossject Société Anonyme had liabilities of €8.44m falling due within a year, and liabilities of €21.7m due beyond that. Offsetting these obligations, it had cash of €7.77m as well as receivables valued at €3.18m due within 12 months. So its liabilities total €19.2m more than the combination of its cash and short-term receivables.

Since publicly traded Crossject Société Anonyme shares are worth a total of €149.4m, it seems unlikely that this level of liabilities would be a major threat. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. When analysing debt levels, the balance sheet is the obvious place to start. But it is Crossject Société Anonyme'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.

In the last year Crossject Société Anonyme wasn't profitable at an EBIT level, but managed to grow its revenue by 9.0%, to €7.1m. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Importantly, Crossject Société Anonyme had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost €13m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled €12m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. 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. To that end, you should learn about the 4 warning signs we've spotted with Crossject Société Anonyme (including 2 which are significant) .

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.