Does eVISO (BIT:EVISO) Have A Healthy Balance Sheet?

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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that eVISO S.p.A. (BIT:EVISO) does have debt on its balance sheet. But is this debt a concern to shareholders?

Our free stock report includes 1 warning sign investors should be aware of before investing in eVISO. Read for free now.

What Risk Does Debt Bring?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does eVISO Carry?

The chart below, which you can click on for greater detail, shows that eVISO had €8.94m in debt in December 2024; about the same as the year before. But it also has €20.8m in cash to offset that, meaning it has €11.9m net cash.

How Healthy Is eVISO's Balance Sheet?

We can see from the most recent balance sheet that eVISO had liabilities of €62.3m falling due within a year, and liabilities of €5.74m due beyond that. Offsetting this, it had €20.8m in cash and €44.6m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €2.67m.

This state of affairs indicates that eVISO'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 €239.3m company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, eVISO also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for eVISO

Even more impressive was the fact that eVISO grew its EBIT by 103% over twelve months. That boost will make it even easier to pay down debt going forward. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine eVISO's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. eVISO may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. During the last three years, eVISO generated free cash flow amounting to a very robust 93% of its EBIT, more than we'd expect. That puts it in a very strong position to pay down debt.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that eVISO has €11.9m in net cash. The cherry on top was that in converted 93% of that EBIT to free cash flow, bringing in €9.9m. So is eVISO's debt a risk? It doesn't seem so to us. 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 instance, we've identified 1 warning sign for eVISO that you should be aware of.

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.