Does Saule Technologies (WSE:SLT) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. We note that Saule Technologies S.A. (WSE:SLT) does have debt on its balance sheet. But is this debt a concern to shareholders?

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. 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 think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for Saule Technologies

What Is Saule Technologies's Net Debt?

As you can see below, at the end of December 2024, Saule Technologies had zł80.2m of debt, up from zł50.9m a year ago. Click the image for more detail. And it doesn't have much cash, so its net debt is about the same.

A Look At Saule Technologies' Liabilities

The latest balance sheet data shows that Saule Technologies had liabilities of zł103.0m due within a year, and liabilities of zł57.4m falling due after that. Offsetting this, it had zł1.13m in cash and zł2.95m in receivables that were due within 12 months. So its liabilities total zł156.3m more than the combination of its cash and short-term receivables.

This deficit is considerable relative to its market capitalization of zł175.2m, so it does suggest shareholders should keep an eye on Saule Technologies' use of debt. 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 Saule Technologies's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Over 12 months, Saule Technologies made a loss at the EBIT level, and saw its revenue drop to zł1.3m, which is a fall of 7.2%. That's not what we would hope to see.

Caveat Emptor

Importantly, Saule Technologies had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping zł25m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled zł24m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 6 warning signs for Saule Technologies (4 are potentially serious) you should be aware of.

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.