Ktima Kostas Lazaridis (ATH:KTILA) Is Making Moderate Use Of Debt
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.' 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. We can see that Ktima Kostas Lazaridis S.A. (ATH:KTILA) does use debt in its business. But the real question is whether this debt is making the company risky.
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. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.
View our latest analysis for Ktima Kostas Lazaridis
How Much Debt Does Ktima Kostas Lazaridis Carry?
You can click the graphic below for the historical numbers, but it shows that as of June 2021 Ktima Kostas Lazaridis had €9.76m of debt, an increase on €8.52m, over one year. On the flip side, it has €2.55m in cash leading to net debt of about €7.21m.
How Healthy Is Ktima Kostas Lazaridis' Balance Sheet?
According to the last reported balance sheet, Ktima Kostas Lazaridis had liabilities of €3.75m due within 12 months, and liabilities of €12.0m due beyond 12 months. On the other hand, it had cash of €2.55m and €3.31m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by €9.87m.
While this might seem like a lot, it is not so bad since Ktima Kostas Lazaridis has a market capitalization of €41.1m, 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 it is Ktima Kostas Lazaridis'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 Ktima Kostas Lazaridis wasn't profitable at an EBIT level, but managed to grow its revenue by 10%, to €14m. 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 Ktima Kostas Lazaridis produced an earnings before interest and tax (EBIT) loss. Indeed, it lost €461k 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. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through €985k of cash over the last year. So suffice it to say we do 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. Case in point: We've spotted 2 warning signs for Ktima Kostas Lazaridis you should be aware of.
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.
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About ATSE:KTILA
Domain Costa Lazaridi
Engages in the production and sale of wines in Greece and rest of Europe.
Mediocre balance sheet and slightly overvalued.