ÉPDUFERR Nyilvánosan Muködo Részvénytársaság (BUSE:EPDUFERR) Is Carrying A Fair Bit Of Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. As with many other companies ÉPDUFERR Nyilvánosan Muködo Részvénytársaság (BUSE:EPDUFERR) makes use of debt. But should shareholders be worried about its use of debt?

When Is Debt A Problem?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

View our latest analysis for ÉPDUFERR Nyilvánosan Muködo Részvénytársaság

How Much Debt Does ÉPDUFERR Nyilvánosan Muködo Részvénytársaság Carry?

As you can see below, at the end of June 2024, ÉPDUFERR Nyilvánosan Muködo Részvénytársaság had Ft964.4m of debt, up from Ft720.1m a year ago. Click the image for more detail. And it doesn't have much cash, so its net debt is about the same.

A Look At ÉPDUFERR Nyilvánosan Muködo Részvénytársaság's Liabilities

Zooming in on the latest balance sheet data, we can see that ÉPDUFERR Nyilvánosan Muködo Részvénytársaság had liabilities of Ft2.16b due within 12 months and liabilities of Ft714.9m due beyond that. Offsetting these obligations, it had cash of Ft15.5m as well as receivables valued at Ft1.41b due within 12 months. So it has liabilities totalling Ft1.45b more than its cash and near-term receivables, combined.

This deficit isn't so bad because ÉPDUFERR Nyilvánosan Muködo Részvénytársaság is worth Ft3.08b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since ÉPDUFERR Nyilvánosan Muködo Részvénytársaság will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Over 12 months, ÉPDUFERR Nyilvánosan Muködo Részvénytársaság reported revenue of Ft5.5b, which is a gain of 13%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Over the last twelve months ÉPDUFERR Nyilvánosan Muködo Részvénytársaság produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at Ft178m. 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. Another cause for caution is that is bled Ft308m in negative free cash flow over the last twelve months. So in short it's a really risky stock. 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 instance, we've identified 4 warning signs for ÉPDUFERR Nyilvánosan Muködo Részvénytársaság (3 can't be ignored) 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.