Does AMA (EPA:ALAMA) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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. Importantly, AMA Corporation Plc (EPA:ALAMA) does carry debt. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

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. 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. 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 think about a company's use of debt, we first look at cash and debt together.

What Is AMA's Debt?

The image below, which you can click on for greater detail, shows that AMA had debt of €1.92m at the end of June 2025, a reduction from €2.47m over a year. However, it does have €5.09m in cash offsetting this, leading to net cash of €3.17m.

A Look At AMA's Liabilities

According to the last reported balance sheet, AMA had liabilities of €3.65m due within 12 months, and liabilities of €2.63m due beyond 12 months. On the other hand, it had cash of €5.09m and €534.0k worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by €653.0k.

Since publicly traded AMA shares are worth a total of €10.8m, 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. While it does have liabilities worth noting, AMA 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 AMA'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 AMA

In the last year AMA had a loss before interest and tax, and actually shrunk its revenue by 9.7%, to €2.4m. We would much prefer see growth.

So How Risky Is AMA?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that AMA had an earnings before interest and tax (EBIT) loss, over the last year. And over the same period it saw negative free cash outflow of €5.1m and booked a €5.5m accounting loss. But at least it has €3.17m on the balance sheet to spend on growth, near-term. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see 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. Case in point: We've spotted 4 warning signs for AMA you should be aware of, and 1 of them is a bit unpleasant.

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.