Haidemenos Integrated Printing Services (ATH:HAIDE) Is Making Moderate Use Of Debt

Legendary fund manager Li Lu (who Charlie Munger backed) once said, '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 can see that Haidemenos Integrated Printing Services S.A. (ATH:HAIDE) does use debt in its business. But the real question is whether this debt is making the company risky.

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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.

Check out our latest analysis for Haidemenos Integrated Printing Services

What Is Haidemenos Integrated Printing Services's Debt?

You can click the graphic below for the historical numbers, but it shows that Haidemenos Integrated Printing Services had €7.08m of debt in June 2024, down from €9.44m, one year before. However, it does have €2.03m in cash offsetting this, leading to net debt of about €5.05m.

A Look At Haidemenos Integrated Printing Services' Liabilities

Zooming in on the latest balance sheet data, we can see that Haidemenos Integrated Printing Services had liabilities of €7.75m due within 12 months and liabilities of €3.05m due beyond that. Offsetting this, it had €2.03m in cash and €4.93m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €3.84m.

This deficit is considerable relative to its market capitalization of €5.00m, so it does suggest shareholders should keep an eye on Haidemenos Integrated Printing Services' use of debt. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Haidemenos Integrated Printing Services will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Over 12 months, Haidemenos Integrated Printing Services saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that's not too bad, we'd prefer see growth.

Caveat Emptor

Importantly, Haidemenos Integrated Printing Services had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping €1.1m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. We would feel better if it turned its trailing twelve month loss of €1.7m into a profit. So in short it's a really risky stock. 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. For instance, we've identified 3 warning signs for Haidemenos Integrated Printing Services (2 are a bit concerning) you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.