Is SYS-DAT (BIT:SYS) Using Too Much Debt?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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. We can see that SYS-DAT S.p.A. (BIT:SYS) does use debt in its business. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

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. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does SYS-DAT Carry?

You can click the graphic below for the historical numbers, but it shows that SYS-DAT had €1.30m of debt in September 2025, down from €10.5m, one year before. However, its balance sheet shows it holds €54.0m in cash, so it actually has €52.7m net cash.

How Healthy Is SYS-DAT's Balance Sheet?

The latest balance sheet data shows that SYS-DAT had liabilities of €40.8m due within a year, and liabilities of €38.4m falling due after that. Offsetting this, it had €54.0m in cash and €25.0m in receivables that were due within 12 months. So these liquid assets roughly match the total liabilities.

This state of affairs indicates that SYS-DAT's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the €176.4m company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, SYS-DAT also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for SYS-DAT

Another good sign is that SYS-DAT has been able to increase its EBIT by 26% in twelve months, making it easier to pay down debt. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine SYS-DAT's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While SYS-DAT has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. During the last three years, SYS-DAT produced sturdy free cash flow equating to 80% of its EBIT, about what we'd expect. This cold hard cash means it can reduce its debt when it wants to.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that SYS-DAT has €52.7m in net cash. The cherry on top was that in converted 80% of that EBIT to free cash flow, bringing in €10m. So is SYS-DAT's debt a risk? It doesn't seem so to us. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of SYS-DAT's earnings per share history for free.

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.