Is Fastned B.V (AMS:FAST) A Risky Investment?

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 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. As with many other companies Fastned B.V. (AMS:FAST) makes use of debt. But the more important question is: how much risk is that debt creating?

When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

View our latest analysis for Fastned B.V

How Much Debt Does Fastned B.V Carry?

The image below, which you can click on for greater detail, shows that at December 2023 Fastned B.V had debt of €161.0m, up from €112.9m in one year. However, it also had €126.6m in cash, and so its net debt is €34.4m.

A Look At Fastned B.V's Liabilities

Zooming in on the latest balance sheet data, we can see that Fastned B.V had liabilities of €34.7m due within 12 months and liabilities of €176.7m due beyond that. Offsetting these obligations, it had cash of €126.6m as well as receivables valued at €15.4m due within 12 months. So it has liabilities totalling €69.4m more than its cash and near-term receivables, combined.

Given Fastned B.V has a market capitalization of €409.8m, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Fastned B.V'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.

In the last year Fastned B.V wasn't profitable at an EBIT level, but managed to grow its revenue by 68%, to €61m. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

While we can certainly appreciate Fastned B.V's revenue growth, its earnings before interest and tax (EBIT) loss is not ideal. To be specific the EBIT loss came in at €8.9m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through €70m of cash over the last year. So in short it's a really risky stock. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how Fastned B.V's profit, revenue, and operating cashflow have changed over the last few years.

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.