Here's Why Toscana Aeroporti (BIT:TYA) Can Afford Some Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 note that Toscana Aeroporti S.p.A. (BIT:TYA) does have debt on its balance sheet. But is this debt a concern to shareholders?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

See our latest analysis for Toscana Aeroporti

What Is Toscana Aeroporti's Debt?

The image below, which you can click on for greater detail, shows that at December 2020 Toscana Aeroporti had debt of €149.0m, up from €48.3m in one year. On the flip side, it has €76.3m in cash leading to net debt of about €72.7m.

A Look At Toscana Aeroporti's Liabilities

Zooming in on the latest balance sheet data, we can see that Toscana Aeroporti had liabilities of €96.0m due within 12 months and liabilities of €129.2m due beyond that. On the other hand, it had cash of €76.3m and €31.8m worth of receivables due within a year. So it has liabilities totalling €117.0m more than its cash and near-term receivables, combined.

Toscana Aeroporti has a market capitalization of €253.1m, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Toscana Aeroporti can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, Toscana Aeroporti made a loss at the EBIT level, and saw its revenue drop to €49m, which is a fall of 61%. To be frank that doesn't bode well.

Caveat Emptor

While Toscana Aeroporti'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 €15m 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. However, it doesn't help that it burned through €44m of cash over the last year. So suffice it to say we consider the stock very risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - Toscana Aeroporti has 1 warning sign we think you should be aware of.

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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