Is Przedsiebiorstwo Hydrauliki Silowej HYDROTOR (WSE:HDR) A Risky Investment?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 can see that Przedsiebiorstwo Hydrauliki Silowej HYDROTOR S.A. (WSE:HDR) does use debt in its business. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. 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 Przedsiebiorstwo Hydrauliki Silowej HYDROTOR's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Przedsiebiorstwo Hydrauliki Silowej HYDROTOR had zł17.6m of debt, an increase on zł16.8m, over one year. However, because it has a cash reserve of zł1.12m, its net debt is less, at about zł16.5m.

How Healthy Is Przedsiebiorstwo Hydrauliki Silowej HYDROTOR's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Przedsiebiorstwo Hydrauliki Silowej HYDROTOR had liabilities of zł45.6m due within 12 months and liabilities of zł23.9m due beyond that. Offsetting this, it had zł1.12m in cash and zł34.3m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by zł34.1m.

This is a mountain of leverage relative to its market capitalization of zł38.4m. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Przedsiebiorstwo Hydrauliki Silowej HYDROTOR will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Check out our latest analysis for Przedsiebiorstwo Hydrauliki Silowej HYDROTOR

In the last year Przedsiebiorstwo Hydrauliki Silowej HYDROTOR wasn't profitable at an EBIT level, but managed to grow its revenue by 4.6%, to zł116m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months Przedsiebiorstwo Hydrauliki Silowej HYDROTOR produced an earnings before interest and tax (EBIT) loss. Its EBIT loss was a whopping zł13m. 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. For example, we would not want to see a repeat of last year's loss of zł12m. In the meantime, we consider the stock very risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example Przedsiebiorstwo Hydrauliki Silowej HYDROTOR has 2 warning signs (and 1 which is concerning) we think you should know about.

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.