Ðuro Ðakovic Grupa d.d (ZGSE:DDJH) Is Making Moderate Use Of Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. As with many other companies Ðuro Ðakovic Grupa d.d. (ZGSE:DDJH) makes use of debt. But should shareholders be worried about its use of debt?

What Risk Does Debt Bring?

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. If things get really bad, the lenders can take control of the business. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

Check out our latest analysis for Ðuro Ðakovic Grupa d.d

What Is Ðuro Ðakovic Grupa d.d's Debt?

You can click the graphic below for the historical numbers, but it shows that Ðuro Ðakovic Grupa d.d had €15.2m of debt in June 2024, down from €17.3m, one year before. On the flip side, it has €2.52m in cash leading to net debt of about €12.6m.

A Look At Ðuro Ðakovic Grupa d.d's Liabilities

Zooming in on the latest balance sheet data, we can see that Ðuro Ðakovic Grupa d.d had liabilities of €47.2m due within 12 months and liabilities of €22.8m due beyond that. Offsetting these obligations, it had cash of €2.52m as well as receivables valued at €13.7m due within 12 months. So its liabilities total €53.9m more than the combination of its cash and short-term receivables.

Given Ðuro Ðakovic Grupa d.d has a market capitalization of €735.9m, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. There's no doubt that we learn most about debt from the balance sheet. But it is Ðuro Ðakovic Grupa d.d'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.

In the last year Ðuro Ðakovic Grupa d.d wasn't profitable at an EBIT level, but managed to grow its revenue by 11%, to €106m. 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 Ðuro Ðakovic Grupa d.d produced an earnings before interest and tax (EBIT) loss. Indeed, it lost €359k 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. So we think its balance sheet is a little strained, though not beyond repair. Surprisingly, we note that it actually reported positive free cash flow of €32m and a profit of €3.7m. So one might argue that there's still a chance it can get things on the right track. 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. For instance, we've identified 3 warning signs for Ðuro Ðakovic Grupa d.d (2 are potentially serious) 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.