We Think Quest Holdings (ATH:QUEST) Can Stay On Top Of Its Debt

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that Quest Holdings S.A. (ATH:QUEST) does have debt on its balance sheet. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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.

What Is Quest Holdings's Net Debt?

The chart below, which you can click on for greater detail, shows that Quest Holdings had €131.0m in debt in June 2025; about the same as the year before. However, its balance sheet shows it holds €131.6m in cash, so it actually has €602.0k net cash.

A Look At Quest Holdings' Liabilities

According to the last reported balance sheet, Quest Holdings had liabilities of €377.1m due within 12 months, and liabilities of €185.0m due beyond 12 months. Offsetting these obligations, it had cash of €131.6m as well as receivables valued at €324.8m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €105.7m.

Given Quest Holdings has a market capitalization of €786.6m, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, Quest Holdings also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Quest Holdings

And we also note warmly that Quest Holdings grew its EBIT by 18% last year, making its debt load easier to handle. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Quest Holdings can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. Quest Holdings may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. In the last three years, Quest Holdings's free cash flow amounted to 25% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While Quest Holdings does have more liabilities than liquid assets, it also has net cash of €602.0k. And it impressed us with its EBIT growth of 18% over the last year. So we don't have any problem with Quest Holdings's use of debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example, we've discovered 1 warning sign for Quest Holdings that you should be aware of before investing here.

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.