We Think Constellation Oil Services Holding (OB:COSH) Has A Fair Chunk Of Debt

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.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Constellation Oil Services Holding S.A. (OB:COSH) makes use of debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

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 frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Constellation Oil Services Holding's Debt?

You can click the graphic below for the historical numbers, but it shows that Constellation Oil Services Holding had US$644.0m of debt in June 2025, down from US$964.2m, one year before. However, because it has a cash reserve of US$204.0m, its net debt is less, at about US$440.0m.

A Look At Constellation Oil Services Holding's Liabilities

We can see from the most recent balance sheet that Constellation Oil Services Holding had liabilities of US$140.0m falling due within a year, and liabilities of US$664.9m due beyond that. Offsetting this, it had US$204.0m in cash and US$120.3m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$480.6m.

Of course, Constellation Oil Services Holding has a titanic market capitalization of US$16.4b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. 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 Constellation Oil Services Holding'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.

View our latest analysis for Constellation Oil Services Holding

In the last year Constellation Oil Services Holding had a loss before interest and tax, and actually shrunk its revenue by 3.9%, to US$536m. That's not what we would hope to see.

Caveat Emptor

Importantly, Constellation Oil Services Holding had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost US$2.4m 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. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. For example, we would not want to see a repeat of last year's loss of US$62m. So we do think this stock is quite risky. 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 Constellation Oil Services Holding'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.