Icelandair Group hf (ICE:ICEAIR) Has Debt But No Earnings; Should You Worry?

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.' 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 can see that Icelandair Group hf. (ICE:ICEAIR) does use debt in its business. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. 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 Icelandair Group hf Carry?

The image below, which you can click on for greater detail, shows that Icelandair Group hf had debt of US$190.0m at the end of June 2025, a reduction from US$226.8m over a year. However, it does have US$480.2m in cash offsetting this, leading to net cash of US$290.2m.

How Healthy Is Icelandair Group hf's Balance Sheet?

We can see from the most recent balance sheet that Icelandair Group hf had liabilities of US$1.01b falling due within a year, and liabilities of US$765.6m due beyond that. On the other hand, it had cash of US$480.2m and US$208.7m worth of receivables due within a year. So its liabilities total US$1.08b more than the combination of its cash and short-term receivables.

The deficiency here weighs heavily on the US$384.3m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. After all, Icelandair Group hf would likely require a major re-capitalisation if it had to pay its creditors today. Given that Icelandair Group hf has more cash than debt, we're pretty confident it can handle its debt, despite the fact that it has a lot of liabilities in total. There's no doubt that we learn most about debt from the balance sheet. But it is Icelandair Group hf'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 Icelandair Group hf

In the last year Icelandair Group hf wasn't profitable at an EBIT level, but managed to grow its revenue by 6.9%, to US$1.7b. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Icelandair Group hf?

While Icelandair Group hf lost money on an earnings before interest and tax (EBIT) level, it actually booked a paper profit of US$7.4m. So taking that on face value, and considering the cash, we don't think its very risky in the near term. Given the lack of transparency around future revenue (and cashflow), we're nervous about this one, until it makes its first big sales. To us, it is a high risk play. 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. Be aware that Icelandair Group hf is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.