Is MEGAKRÁN Kereskedelmi és Szolgáltató Nyilvánosan Muködo Részvénytársaság (BUSE:MEGAKRAN) Using Too Much Debt?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. Importantly, MEGAKRÁN Kereskedelmi és Szolgáltató Nyilvánosan Muködo Részvénytársaság (BUSE:MEGAKRAN) does carry debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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 examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does MEGAKRÁN Kereskedelmi és Szolgáltató Nyilvánosan Muködo Részvénytársaság Carry?

As you can see below, MEGAKRÁN Kereskedelmi és Szolgáltató Nyilvánosan Muködo Részvénytársaság had Ft640.0m of debt at June 2025, down from Ft785.1m a year prior. However, it does have Ft240.9m in cash offsetting this, leading to net debt of about Ft399.1m.

A Look At MEGAKRÁN Kereskedelmi és Szolgáltató Nyilvánosan Muködo Részvénytársaság's Liabilities

The latest balance sheet data shows that MEGAKRÁN Kereskedelmi és Szolgáltató Nyilvánosan Muködo Részvénytársaság had liabilities of Ft1.15b due within a year, and liabilities of Ft963.0m falling due after that. Offsetting these obligations, it had cash of Ft240.9m as well as receivables valued at Ft423.5m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by Ft1.45b.

While this might seem like a lot, it is not so bad since MEGAKRÁN Kereskedelmi és Szolgáltató Nyilvánosan Muködo Részvénytársaság has a market capitalization of Ft4.31b, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. There's no doubt that we learn most about debt from the balance sheet. But it is MEGAKRÁN Kereskedelmi és Szolgáltató 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 MEGAKRÁN Kereskedelmi és Szolgáltató Nyilvánosan Muködo Részvénytársaság

In the last year MEGAKRÁN Kereskedelmi és Szolgáltató Nyilvánosan Muködo Részvénytársaság had a loss before interest and tax, and actually shrunk its revenue by 15%, to Ft2.6b. We would much prefer see growth.

Caveat Emptor

While MEGAKRÁN Kereskedelmi és Szolgáltató 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 Ft256m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much 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 Ft217m of cash over the last year. So in short it's a really risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. We've identified 2 warning signs with MEGAKRÁN Kereskedelmi és Szolgáltató Nyilvánosan Muködo Részvénytársaság , and understanding them should be part of your investment process.

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.