Is BioFish Holding (OB:BFISH) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. We can see that BioFish Holding AS (OB:BFISH) does use debt in its business. But is this debt a concern to shareholders?

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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. If things get really bad, the lenders can take control of the business. 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. 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.

What Is BioFish Holding's Debt?

As you can see below, at the end of December 2024, BioFish Holding had kr70.6m of debt, up from kr52.0m a year ago. Click the image for more detail. However, because it has a cash reserve of kr3.24m, its net debt is less, at about kr67.3m.

A Look At BioFish Holding's Liabilities

We can see from the most recent balance sheet that BioFish Holding had liabilities of kr33.0m falling due within a year, and liabilities of kr49.0m due beyond that. On the other hand, it had cash of kr3.24m and kr2.59m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by kr76.2m.

While this might seem like a lot, it is not so bad since BioFish Holding has a market capitalization of kr182.5m, and so it could probably strengthen its balance sheet by raising capital if it needed to. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if BioFish Holding can strengthen its balance sheet over time. 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 BioFish Holding

Over 12 months, BioFish Holding reported revenue of kr49m, which is a gain of 2.5%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Over the last twelve months BioFish Holding produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable kr23m 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. Another cause for caution is that is bled kr24m in negative free cash flow over the last twelve months. So in short it's a really risky stock. 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 - BioFish Holding has 3 warning signs we think 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.