Stock Analysis

Is Kiriacoulis Mediterranean Cruises Shipping (ATH:KYRI) Weighed On By Its Debt Load?

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Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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 Kiriacoulis Mediterranean Cruises Shipping SA (ATH:KYRI) does have debt on its balance sheet. But is this debt a concern to shareholders?

When Is Debt A Problem?

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 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 think about a company's use of debt, we first look at cash and debt together.

See our latest analysis for Kiriacoulis Mediterranean Cruises Shipping

What Is Kiriacoulis Mediterranean Cruises Shipping's Debt?

You can click the graphic below for the historical numbers, but it shows that Kiriacoulis Mediterranean Cruises Shipping had €7.97m of debt in June 2022, down from €9.58m, one year before. However, because it has a cash reserve of €2.34m, its net debt is less, at about €5.63m.

ATSE:KYRI Debt to Equity History October 3rd 2022

A Look At Kiriacoulis Mediterranean Cruises Shipping's Liabilities

The latest balance sheet data shows that Kiriacoulis Mediterranean Cruises Shipping had liabilities of €23.5m due within a year, and liabilities of €18.1m falling due after that. Offsetting this, it had €2.34m in cash and €26.2m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €13.1m.

The deficiency here weighs heavily on the €7.60m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we definitely think shareholders need to watch this one closely. After all, Kiriacoulis Mediterranean Cruises Shipping would likely require a major re-capitalisation if it had to pay its creditors today. When analysing debt levels, the balance sheet is the obvious place to start. But it is Kiriacoulis Mediterranean Cruises Shipping's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

In the last year Kiriacoulis Mediterranean Cruises Shipping wasn't profitable at an EBIT level, but managed to grow its revenue by 8.3%, to €27m. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Over the last twelve months Kiriacoulis Mediterranean Cruises Shipping produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable €964k at the EBIT level. When we look at that alongside the significant liabilities, we're not particularly confident about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. For example, we would not want to see a repeat of last year's loss of €1.2m. In the meantime, we consider the stock to be risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 3 warning signs for Kiriacoulis Mediterranean Cruises Shipping (2 shouldn't be ignored) you should be aware of.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Kiriacoulis Mediterranean Cruises Shipping is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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Kiriacoulis Mediterranean Cruises Shipping

Kiriacoulis Mediterranean Cruises Shipping SA, together with its subsidiaries, engages in the professional sea tourism, tourist ports management, and real estate businesses.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Future Growth0
Past Performance0
Financial Health4

Read more about these checks in the individual report sections or in our analysis model.

Adequate balance sheet and slightly overvalued.