Rocket Sharing (BIT:RKT) Is Making Moderate Use Of Debt

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. Importantly, Rocket Sharing Company S.p.A. (BIT:RKT) does carry debt. But should shareholders be worried about its use of debt?

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Rocket Sharing Carry?

The image below, which you can click on for greater detail, shows that at June 2025 Rocket Sharing had debt of €2.29m, up from €1.68m in one year. However, it also had €437.0k in cash, and so its net debt is €1.85m.

A Look At Rocket Sharing's Liabilities

The latest balance sheet data shows that Rocket Sharing had liabilities of €5.68m due within a year, and liabilities of €185.7k falling due after that. Offsetting these obligations, it had cash of €437.0k as well as receivables valued at €1.66m due within 12 months. So it has liabilities totalling €3.76m more than its cash and near-term receivables, combined.

This is a mountain of leverage relative to its market capitalization of €4.68m. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Rocket Sharing 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.

View our latest analysis for Rocket Sharing

In the last year Rocket Sharing wasn't profitable at an EBIT level, but managed to grow its revenue by 54%, to €5.9m. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

While we can certainly appreciate Rocket Sharing's revenue growth, its earnings before interest and tax (EBIT) loss is not ideal. Indeed, it lost €109k 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. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled €1.1m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 4 warning signs for Rocket Sharing (2 don't sit too well with us!) that you should be aware of before investing here.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.