Does Laboratoires Euromedis Société anonyme (EPA:ALEMG) Have A Healthy Balance Sheet?

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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that Laboratoires Euromedis Société anonyme (EPA:ALEMG) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

When Is Debt Dangerous?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. 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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

See our latest analysis for Laboratoires Euromedis Société anonyme

What Is Laboratoires Euromedis Société anonyme's Net Debt?

As you can see below, Laboratoires Euromedis Société anonyme had €9.04m of debt at June 2024, down from €11.8m a year prior. But on the other hand it also has €18.7m in cash, leading to a €9.63m net cash position.

How Strong Is Laboratoires Euromedis Société anonyme's Balance Sheet?

The latest balance sheet data shows that Laboratoires Euromedis Société anonyme had liabilities of €13.8m due within a year, and liabilities of €9.57m falling due after that. Offsetting this, it had €18.7m in cash and €9.60m in receivables that were due within 12 months. So it can boast €4.85m more liquid assets than total liabilities.

This luscious liquidity implies that Laboratoires Euromedis Société anonyme's balance sheet is sturdy like a giant sequoia tree. On this view, lenders should feel as safe as the beloved of a black-belt karate master. Simply put, the fact that Laboratoires Euromedis Société anonyme has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Laboratoires Euromedis Société anonyme can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, Laboratoires Euromedis Société anonyme made a loss at the EBIT level, and saw its revenue drop to €31m, which is a fall of 37%. To be frank that doesn't bode well.

So How Risky Is Laboratoires Euromedis Société anonyme?

Although Laboratoires Euromedis Société anonyme had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of €18m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. With mediocre revenue growth in the last year, we're don't find the investment opportunity particularly compelling. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. We've identified 4 warning signs with Laboratoires Euromedis Société anonyme (at least 1 which is significant) , and understanding them should be part of your investment process.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.