Is Pipe Works L. Girakian Profil (ATH:PROFK) A Risky Investment?

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. As with many other companies Pipe Works L. Girakian Profil S.A. (ATH:PROFK) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. 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.

How Much Debt Does Pipe Works L. Girakian Profil Carry?

You can click the graphic below for the historical numbers, but it shows that Pipe Works L. Girakian Profil had €16.0m of debt in December 2024, down from €17.4m, one year before. And it doesn't have much cash, so its net debt is about the same.

How Strong Is Pipe Works L. Girakian Profil's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Pipe Works L. Girakian Profil had liabilities of €25.4m due within 12 months and liabilities of €3.19m due beyond that. On the other hand, it had cash of €249.1k and €11.3m worth of receivables due within a year. So it has liabilities totalling €17.1m more than its cash and near-term receivables, combined.

The deficiency here weighs heavily on the €4.22m 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'd watch its balance sheet closely, without a doubt. At the end of the day, Pipe Works L. Girakian Profil would probably need a major re-capitalization if its creditors were to demand repayment. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Pipe Works L. Girakian Profil's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

View our latest analysis for Pipe Works L. Girakian Profil

Over 12 months, Pipe Works L. Girakian Profil made a loss at the EBIT level, and saw its revenue drop to €26m, which is a fall of 15%. That's not what we would hope to see.

Caveat Emptor

Not only did Pipe Works L. Girakian Profil's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Indeed, it lost a very considerable €2.4m at the EBIT level. If you consider the significant liabilities mentioned above, we are extremely wary of this investment. That said, it is possible that the company will turn its fortunes around. Nevertheless, we would not bet on it given that it lost €3.7m in just last twelve months, and it doesn't have much by way of liquid assets. So we think this stock is quite risky. We'd prefer to pass. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for Pipe Works L. Girakian Profil you should know about.

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.