Does Valbiotis (EPA:ALVAL) Have A Healthy Balance Sheet?

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 might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Valbiotis SA (EPA:ALVAL) makes use of debt. But is this debt a concern to shareholders?

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

When Is Debt A Problem?

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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Valbiotis Carry?

The image below, which you can click on for greater detail, shows that Valbiotis had debt of €4.22m at the end of June 2025, a reduction from €4.99m over a year. However, its balance sheet shows it holds €13.2m in cash, so it actually has €9.01m net cash.

How Healthy Is Valbiotis' Balance Sheet?

According to the last reported balance sheet, Valbiotis had liabilities of €5.08m due within 12 months, and liabilities of €3.06m due beyond 12 months. Offsetting this, it had €13.2m in cash and €1.38m in receivables that were due within 12 months. So it can boast €6.47m more liquid assets than total liabilities.

This excess liquidity is a great indication that Valbiotis' balance sheet is almost as strong as Fort Knox. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. Succinctly put, Valbiotis boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Valbiotis's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

View our latest analysis for Valbiotis

Given its lack of meaningful operating revenue, Valbiotis shareholders no doubt hope it can fund itself until it has a profitable product.

So How Risky Is Valbiotis?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months Valbiotis lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through €10.0m of cash and made a loss of €11m. But at least it has €9.01m on the balance sheet to spend on growth, near-term. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 5 warning signs we've spotted with Valbiotis (including 3 which shouldn't be ignored) .

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.