Vercom (WSE:VRC) Has A Rock Solid 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. We note that Vercom S.A. (WSE:VRC) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

When Is Debt A Problem?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Vercom Carry?

The image below, which you can click on for greater detail, shows that Vercom had debt of zł80.3m at the end of June 2025, a reduction from zł96.6m over a year. However, its balance sheet shows it holds zł81.3m in cash, so it actually has zł967.0k net cash.

How Healthy Is Vercom's Balance Sheet?

The latest balance sheet data shows that Vercom had liabilities of zł91.8m due within a year, and liabilities of zł83.2m falling due after that. Offsetting these obligations, it had cash of zł81.3m as well as receivables valued at zł41.6m due within 12 months. So its liabilities total zł52.1m more than the combination of its cash and short-term receivables.

This state of affairs indicates that Vercom's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the zł2.79b company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, Vercom also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for Vercom

Also positive, Vercom grew its EBIT by 30% in the last year, and that should make it easier to pay down debt, going forward. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Vercom's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Vercom 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. Over the last three years, Vercom actually produced more free cash flow than EBIT. That sort of strong cash conversion gets us as excited as the crowd when the beat drops at a Daft Punk concert.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that Vercom has zł967.0k in net cash. And it impressed us with free cash flow of zł95m, being 101% of its EBIT. So is Vercom's debt a risk? It doesn't seem so to us. Over time, share prices tend to follow earnings per share, so if you're interested in Vercom, you may well want to click here to check an interactive graph of its earnings per share history.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.