Is BATM Advanced Communications (LON:BVC) Using Debt In A Risky Way?

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. As with many other companies BATM Advanced Communications Ltd. (LON:BVC) makes use of debt. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

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. If things get really bad, the lenders can take control of the business. 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 examine debt levels, we first consider both cash and debt levels, together.

What Is BATM Advanced Communications's Net Debt?

The image below, which you can click on for greater detail, shows that BATM Advanced Communications had debt of US$4.73m at the end of June 2025, a reduction from US$5.04m over a year. But on the other hand it also has US$27.0m in cash, leading to a US$22.3m net cash position.

A Look At BATM Advanced Communications' Liabilities

The latest balance sheet data shows that BATM Advanced Communications had liabilities of US$42.2m due within a year, and liabilities of US$10.0m falling due after that. Offsetting this, it had US$27.0m in cash and US$35.6m in receivables that were due within 12 months. So it can boast US$10.4m more liquid assets than total liabilities.

This short term liquidity is a sign that BATM Advanced Communications could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, BATM Advanced Communications 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 BATM Advanced Communications's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for BATM Advanced Communications

In the last year BATM Advanced Communications wasn't profitable at an EBIT level, but managed to grow its revenue by 2.9%, to US$119m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is BATM Advanced Communications?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And the fact is that over the last twelve months BATM Advanced Communications lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$3.5m and booked a US$8.3m accounting loss. With only US$22.3m on the balance sheet, it would appear that its going to need to raise capital again soon. 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. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 1 warning sign for BATM Advanced Communications that you should be aware of before investing here.

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.