Is Silver Bullet Data Services Group (LON:SBDS) Weighed On By Its Debt Load?

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 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 note that Silver Bullet Data Services Group PLC (LON:SBDS) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Silver Bullet Data Services Group Carry?

As you can see below, at the end of June 2025, Silver Bullet Data Services Group had UK£5.25m of debt, up from UK£3.36m a year ago. Click the image for more detail. On the flip side, it has UK£1.11m in cash leading to net debt of about UK£4.14m.

How Healthy Is Silver Bullet Data Services Group's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Silver Bullet Data Services Group had liabilities of UK£5.48m due within 12 months and liabilities of UK£4.40m due beyond that. Offsetting these obligations, it had cash of UK£1.11m as well as receivables valued at UK£3.45m due within 12 months. So it has liabilities totalling UK£5.33m more than its cash and near-term receivables, combined.

Given this deficit is actually higher than the company's market capitalization of UK£4.21m, we think shareholders really should watch Silver Bullet Data Services Group's debt levels, like a parent watching their child ride a bike for the first time. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Silver Bullet Data Services Group can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Check out our latest analysis for Silver Bullet Data Services Group

Over 12 months, Silver Bullet Data Services Group reported revenue of UK£9.8m, which is a gain of 15%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months Silver Bullet Data Services Group produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable UK£2.4m at the EBIT level. Considering that alongside the liabilities mentioned above make us nervous about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. Not least because it burned through UK£1.3m in negative free cash flow over the last year. So suffice it to say we consider the stock to be risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example Silver Bullet Data Services Group has 4 warning signs (and 2 which don't sit too well with us) we think you should know about.

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.