Is ÉPDUFERR Nyilvánosan Muködo Részvénytársaság (BUSE:EPDUFERR) Using Too Much Debt?

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. We note that ÉPDUFERR Nyilvánosan Muködo Részvénytársaság (BUSE:EPDUFERR) does have debt on its balance sheet. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. 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.

What Is ÉPDUFERR Nyilvánosan Muködo Részvénytársaság's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 ÉPDUFERR Nyilvánosan Muködo Részvénytársaság had debt of Ft2.15b, up from Ft964.4m in one year. However, because it has a cash reserve of Ft48.8m, its net debt is less, at about Ft2.10b.

How Strong Is ÉPDUFERR Nyilvánosan Muködo Részvénytársaság's Balance Sheet?

The latest balance sheet data shows that ÉPDUFERR Nyilvánosan Muködo Részvénytársaság had liabilities of Ft2.49b due within a year, and liabilities of Ft1.25b falling due after that. On the other hand, it had cash of Ft48.8m and Ft1.58b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by Ft2.12b.

Of course, ÉPDUFERR Nyilvánosan Muködo Részvénytársaság has a market capitalization of Ft13.8b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. The balance sheet is clearly the area to focus on when you are analysing debt. But it is ÉPDUFERR Nyilvánosan Muködo Részvénytársaság'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.

See our latest analysis for ÉPDUFERR Nyilvánosan Muködo Részvénytársaság

Over 12 months, ÉPDUFERR Nyilvánosan Muködo Részvénytársaság made a loss at the EBIT level, and saw its revenue drop to Ft4.8b, which is a fall of 12%. That's not what we would hope to see.

Caveat Emptor

While ÉPDUFERR Nyilvánosan Muködo Részvénytársaság's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Indeed, it lost Ft967m 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 Ft1.4b of cash over the last year. So suffice it to say we consider the stock very risky. 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. For instance, we've identified 4 warning signs for ÉPDUFERR Nyilvánosan Muködo Részvénytársaság (3 are a bit unpleasant) 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.