Does METabolic EXplorer (EPA:METEX) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 can see that METabolic EXplorer S.A. (EPA:METEX) does use debt in its business. But the more important question is: how much risk is that debt creating?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

Check out our latest analysis for METabolic EXplorer

How Much Debt Does METabolic EXplorer Carry?

The image below, which you can click on for greater detail, shows that at December 2021 METabolic EXplorer had debt of €28.4m, up from €14.8m in one year. But it also has €43.3m in cash to offset that, meaning it has €14.9m net cash.

How Strong Is METabolic EXplorer's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that METabolic EXplorer had liabilities of €64.0m due within 12 months and liabilities of €32.6m due beyond that. Offsetting this, it had €43.3m in cash and €42.4m in receivables that were due within 12 months. So it has liabilities totalling €10.9m more than its cash and near-term receivables, combined.

Of course, METabolic EXplorer has a market capitalization of €178.2m, so these liabilities are probably manageable. 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, METabolic EXplorer also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine METabolic EXplorer's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Over 12 months, METabolic EXplorer reported revenue of €172m, which is a gain of 8,930%, although it did not report any earnings before interest and tax. That's virtually the hole-in-one of revenue growth!

So How Risky Is METabolic EXplorer?

While METabolic EXplorer lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of €84m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. The good news for METabolic EXplorer shareholders is that its revenue growth is strong, making it easier to raise capital if need be. But we still think it's somewhat 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. Case in point: We've spotted 4 warning signs for METabolic EXplorer you should be aware of, and 2 of them make us uncomfortable.

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.