Nafpaktos Textile Industry (ATH:NAYP) Is Carrying A Fair Bit 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.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly, Nafpaktos Textile Industry S.A. (ATH:NAYP) does carry debt. But is this debt a concern to shareholders?

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Nafpaktos Textile Industry's Debt?

As you can see below, Nafpaktos Textile Industry had €7.07m of debt at June 2025, down from €8.81m a year prior. However, because it has a cash reserve of €815.3k, its net debt is less, at about €6.26m.

How Healthy Is Nafpaktos Textile Industry's Balance Sheet?

We can see from the most recent balance sheet that Nafpaktos Textile Industry had liabilities of €8.90m falling due within a year, and liabilities of €3.60m due beyond that. On the other hand, it had cash of €815.3k and €4.15m worth of receivables due within a year. So it has liabilities totalling €7.53m more than its cash and near-term receivables, combined.

While this might seem like a lot, it is not so bad since Nafpaktos Textile Industry has a market capitalization of €16.5m, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Nafpaktos Textile Industry 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.

View our latest analysis for Nafpaktos Textile Industry

Over 12 months, Nafpaktos Textile Industry reported revenue of €14m, which is a gain of 11%, 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

Importantly, Nafpaktos Textile Industry had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost €1.2m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. For example, we would not want to see a repeat of last year's loss of €1.3m. So we do think this stock is quite risky. 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. Case in point: We've spotted 3 warning signs for Nafpaktos Textile Industry you should be aware of, and 2 of them are potentially serious.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.