Is Planisware SAS (EPA:PLNW) A Risky Investment?

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.' 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. We can see that Planisware SAS (EPA:PLNW) does use debt in its business. But the more important question is: how much risk is that debt creating?

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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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Planisware SAS Carry?

The image below, which you can click on for greater detail, shows that at June 2025 Planisware SAS had debt of €3.75m, up from €3.36m in one year. However, its balance sheet shows it holds €182.1m in cash, so it actually has €178.4m net cash.

How Healthy Is Planisware SAS' Balance Sheet?

We can see from the most recent balance sheet that Planisware SAS had liabilities of €86.3m falling due within a year, and liabilities of €18.0m due beyond that. On the other hand, it had cash of €182.1m and €57.3m worth of receivables due within a year. So it actually has €135.1m more liquid assets than total liabilities.

This short term liquidity is a sign that Planisware SAS could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Planisware SAS has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for Planisware SAS

And we also note warmly that Planisware SAS grew its EBIT by 18% last year, making its debt load easier to handle. 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 Planisware SAS'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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Planisware SAS may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. During the last three years, Planisware SAS generated free cash flow amounting to a very robust 95% of its EBIT, more than we'd expect. That positions it well to pay down debt if desirable to do so.

Summing Up

While it is always sensible to investigate a company's debt, in this case Planisware SAS has €178.4m in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of €54m, being 95% of its EBIT. So is Planisware SAS's debt a risk? It doesn't seem so to us. Over time, share prices tend to follow earnings per share, so if you're interested in Planisware SAS, you may well want to click here to check an interactive graph of its earnings per share history.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.