eVISO (BIT:EVISO) Has A Pretty Healthy Balance Sheet

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, eVISO S.p.A. (BIT:EVISO) does carry debt. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is eVISO's Debt?

The image below, which you can click on for greater detail, shows that at June 2025 eVISO had debt of €11.2m, up from €8.63m in one year. However, it does have €21.4m in cash offsetting this, leading to net cash of €10.2m.

How Strong Is eVISO's Balance Sheet?

The latest balance sheet data shows that eVISO had liabilities of €49.4m due within a year, and liabilities of €5.06m falling due after that. Offsetting this, it had €21.4m in cash and €31.6m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €1.38m.

Having regard to eVISO's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the €167.0m 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.

Check out our latest analysis for eVISO

But the other side of the story is that eVISO saw its EBIT decline by 3.4% over the last year. That sort of decline, if sustained, will obviously make debt harder to handle. 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 eVISO'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 business needs free cash flow to pay off debt; accounting profits just don't cut it. 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. Looking at the most recent two years, eVISO recorded free cash flow of 39% of its EBIT, which is weaker than we'd expect. That weak cash conversion makes it more difficult to handle indebtedness.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that eVISO has €10.2m in net cash. So we don't have any problem with eVISO's use of debt. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for eVISO you should know about.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.