Is Asseco Poland (WSE:ACP) A Risky Investment?

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. As with many other companies Asseco Poland S.A. (WSE:ACP) makes use of debt. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Asseco Poland's Net Debt?

The image below, which you can click on for greater detail, shows that Asseco Poland had debt of zł2.77b at the end of March 2025, a reduction from zł3.16b over a year. However, its balance sheet shows it holds zł3.09b in cash, so it actually has zł314.5m net cash.

How Strong Is Asseco Poland's Balance Sheet?

According to the last reported balance sheet, Asseco Poland had liabilities of zł6.78b due within 12 months, and liabilities of zł3.62b due beyond 12 months. Offsetting these obligations, it had cash of zł3.09b as well as receivables valued at zł5.22b due within 12 months. So it has liabilities totalling zł2.09b more than its cash and near-term receivables, combined.

Since publicly traded Asseco Poland shares are worth a total of zł12.9b, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, Asseco Poland boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Asseco Poland

And we also note warmly that Asseco Poland grew its EBIT by 14% last year, making its debt load easier to handle. 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 Asseco Poland can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Asseco Poland has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Happily for any shareholders, Asseco Poland actually produced more free cash flow than EBIT over the last three years. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

Although Asseco Poland's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of zł314.5m. The cherry on top was that in converted 111% of that EBIT to free cash flow, bringing in zł2.1b. So we don't think Asseco Poland's use of debt is risky. Over time, share prices tend to follow earnings per share, so if you're interested in Asseco Poland, you may well want to click here to check an interactive graph of its earnings per share history.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.