Does Ruch Chorzów (WSE:RCW) Have A Healthy Balance Sheet?

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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. As with many other companies Ruch Chorzów S.A. (WSE:RCW) makes use of debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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 step when considering a company's debt levels is to consider its cash and debt together.

What Is Ruch Chorzów's Debt?

The image below, which you can click on for greater detail, shows that Ruch Chorzów had debt of zł12.0m at the end of June 2025, a reduction from zł12.9m over a year. However, it does have zł1.42m in cash offsetting this, leading to net debt of about zł10.6m.

How Strong Is Ruch Chorzów's Balance Sheet?

According to the last reported balance sheet, Ruch Chorzów had liabilities of zł9.57m due within 12 months, and liabilities of zł12.2m due beyond 12 months. On the other hand, it had cash of zł1.42m and zł5.01m worth of receivables due within a year. So its liabilities total zł15.3m more than the combination of its cash and short-term receivables.

This is a mountain of leverage relative to its market capitalization of zł22.1m. 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 it is Ruch Chorzów's earnings that will influence how the balance sheet holds up in the future. 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 Ruch Chorzów

In the last year Ruch Chorzów had a loss before interest and tax, and actually shrunk its revenue by 23%, to zł23m. That makes us nervous, to say the least.

Caveat Emptor

Not only did Ruch Chorzów's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Its EBIT loss was a whopping zł7.6m. 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. Another cause for caution is that is bled zł6.5m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 4 warning signs we've spotted with Ruch Chorzów .

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.