Is I Grandi Viaggi (BIT:IGV) Weighed On By Its Debt Load?

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. Importantly, I Grandi Viaggi S.p.A. (BIT:IGV) does carry 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 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, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

Check out our latest analysis for I Grandi Viaggi

What Is I Grandi Viaggi's Debt?

As you can see below, I Grandi Viaggi had €6.05m of debt at July 2022, down from €7.82m a year prior. But it also has €18.1m in cash to offset that, meaning it has €12.1m net cash.

A Look At I Grandi Viaggi's Liabilities

According to the last reported balance sheet, I Grandi Viaggi had liabilities of €42.4m due within 12 months, and liabilities of €13.3m due beyond 12 months. Offsetting this, it had €18.1m in cash and €12.0m in receivables that were due within 12 months. So its liabilities total €25.5m more than the combination of its cash and short-term receivables.

This is a mountain of leverage relative to its market capitalization of €41.5m. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. Despite its noteworthy liabilities, I Grandi Viaggi boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if I Grandi Viaggi can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

In the last year I Grandi Viaggi wasn't profitable at an EBIT level, but managed to grow its revenue by 82%, to €41m. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is I Grandi Viaggi?

Although I Grandi Viaggi had an earnings before interest and tax (EBIT) loss over the last twelve months, it made a statutory profit of €105k. So taking that on face value, and considering the cash, we don't think its very risky in the near term. One positive is that I Grandi Viaggi is growing revenue apace, which makes it easier to sell a growth story and raise capital if need be. But we still think it's somewhat risky. 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 1 warning sign for I Grandi Viaggi that you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.