SpineGuard (EPA:ALSGD) Is Making Moderate Use Of Debt

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.' 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. Importantly, SpineGuard SA (EPA:ALSGD) does carry debt. But the more important question is: how much risk is that debt creating?

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does SpineGuard Carry?

The image below, which you can click on for greater detail, shows that SpineGuard had debt of €2.03m at the end of June 2025, a reduction from €2.52m over a year. However, it does have €745.1k in cash offsetting this, leading to net debt of about €1.28m.

How Strong Is SpineGuard's Balance Sheet?

The latest balance sheet data shows that SpineGuard had liabilities of €3.09m due within a year, and liabilities of €979.5k falling due after that. Offsetting these obligations, it had cash of €745.1k as well as receivables valued at €1.54m due within 12 months. So it has liabilities totalling €1.78m more than its cash and near-term receivables, combined.

While this might seem like a lot, it is not so bad since SpineGuard has a market capitalization of €5.88m, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. There's no doubt that we learn most about debt from the balance sheet. But it is SpineGuard'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.

See our latest analysis for SpineGuard

In the last year SpineGuard had a loss before interest and tax, and actually shrunk its revenue by 4.5%, to €4.3m. That's not what we would hope to see.

Caveat Emptor

Importantly, SpineGuard had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping €2.2m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled €1.4m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example SpineGuard has 5 warning signs (and 3 which are a bit unpleasant) we think you should know about.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.