Does Intertech Inter. Technologies (ATH:INTET) Have A Healthy Balance Sheet?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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, Intertech S.A. Inter. Technologies (ATH:INTET) does carry debt. But is this debt a concern to shareholders?

When Is Debt Dangerous?

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. 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 Intertech Inter. Technologies

What Is Intertech Inter. Technologies's Debt?

You can click the graphic below for the historical numbers, but it shows that Intertech Inter. Technologies had €3.69m of debt in December 2021, down from €4.92m, one year before. However, it also had €512.0k in cash, and so its net debt is €3.18m.

How Healthy Is Intertech Inter. Technologies' Balance Sheet?

We can see from the most recent balance sheet that Intertech Inter. Technologies had liabilities of €5.59m falling due within a year, and liabilities of €2.14m due beyond that. Offsetting this, it had €512.0k in cash and €6.78m in receivables that were due within 12 months. So its liabilities total €433.0k more than the combination of its cash and short-term receivables.

Of course, Intertech Inter. Technologies has a market capitalization of €6.32m, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. The balance sheet is clearly the area to focus on when you are analysing debt. But it is Intertech Inter. Technologies'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 Intertech Inter. Technologies wasn't profitable at an EBIT level, but managed to grow its revenue by 17%, to €22m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Importantly, Intertech Inter. Technologies had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost €20k 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. Another cause for caution is that is bled €379k in negative free cash flow over the last twelve months. So in short it's a really risky stock. 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. Case in point: We've spotted 1 warning sign for Intertech Inter. Technologies 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.

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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.