01Cyberaton Proenergy (WSE:01C) Is Carrying A Fair Bit Of Debt

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.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies 01Cyberaton Proenergy S.A. (WSE:01C) makes use of debt. But is this debt a concern to shareholders?

When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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 step when considering a company's debt levels is to consider its cash and debt together.

View our latest analysis for 01Cyberaton Proenergy

How Much Debt Does 01Cyberaton Proenergy Carry?

As you can see below, at the end of June 2023, 01Cyberaton Proenergy had zł10.4m of debt, up from zł8.85m a year ago. Click the image for more detail. However, it also had zł2.35m in cash, and so its net debt is zł8.05m.

How Strong Is 01Cyberaton Proenergy's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that 01Cyberaton Proenergy had liabilities of zł13.8m due within 12 months and liabilities of zł6.71m due beyond that. On the other hand, it had cash of zł2.35m and zł9.41m worth of receivables due within a year. So it has liabilities totalling zł8.73m more than its cash and near-term receivables, combined.

Since publicly traded 01Cyberaton Proenergy shares are worth a total of zł49.7m, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since 01Cyberaton Proenergy 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.

Over 12 months, 01Cyberaton Proenergy made a loss at the EBIT level, and saw its revenue drop to zł5.2m, which is a fall of 87%. That makes us nervous, to say the least.

Caveat Emptor

Not only did 01Cyberaton Proenergy's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). To be specific the EBIT loss came in at zł3.4m. 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. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through zł5.1m of cash over the last year. So in short it's a really risky stock. 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 4 warning signs for 01Cyberaton Proenergy (2 shouldn't be ignored) 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.