Does EKINOPS (EPA:EKI) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 EKINOPS S.A. (EPA:EKI) does use debt in its business. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does EKINOPS Carry?

As you can see below, at the end of June 2025, EKINOPS had €28.0m of debt, up from €23.8m a year ago. Click the image for more detail. However, it does have €36.7m in cash offsetting this, leading to net cash of €8.72m.

How Healthy Is EKINOPS' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that EKINOPS had liabilities of €50.5m due within 12 months and liabilities of €36.0m due beyond that. On the other hand, it had cash of €36.7m and €37.2m worth of receivables due within a year. So it has liabilities totalling €12.5m more than its cash and near-term receivables, combined.

Of course, EKINOPS has a market capitalization of €97.8m, 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. Despite its noteworthy liabilities, EKINOPS boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for EKINOPS

Notably, EKINOPS made a loss at the EBIT level, last year, but improved that to positive EBIT of €4.8m in the last twelve months. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine EKINOPS'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.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. EKINOPS 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. Over the last year, EKINOPS actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While EKINOPS does have more liabilities than liquid assets, it also has net cash of €8.72m. The cherry on top was that in converted 241% of that EBIT to free cash flow, bringing in €12m. So we are not troubled with EKINOPS's debt use. 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. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for EKINOPS you should know about.

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.