Rock star Growth Puts 01Cyberaton Proenergy (WSE:01C) In A Position To Use Debt

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. We note that 01Cyberaton Proenergy S.A. (WSE:01C) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

What Risk Does Debt Bring?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. 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 examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for 01Cyberaton Proenergy

How Much Debt Does 01Cyberaton Proenergy Carry?

The image below, which you can click on for greater detail, shows that at March 2022 01Cyberaton Proenergy had debt of zł10.5m, up from zł980.7k in one year. However, because it has a cash reserve of zł4.64m, its net debt is less, at about zł5.91m.

How Strong Is 01Cyberaton Proenergy's Balance Sheet?

We can see from the most recent balance sheet that 01Cyberaton Proenergy had liabilities of zł13.0m falling due within a year, and liabilities of -zł13.0m due beyond that. On the other hand, it had cash of zł4.64m and zł8.09m worth of receivables due within a year. So its liabilities exceed the combination of its cash and short-term receivables by a very significant -zł12.7m.

It's good to see that 01Cyberaton Proenergy has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. 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.

In the last year 01Cyberaton Proenergy wasn't profitable at an EBIT level, but managed to grow its revenue by 249%, to zł32m. When it comes to revenue growth, that's like nailing the game winning 3-pointer!

Caveat Emptor

Despite the top line growth, 01Cyberaton Proenergy still had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost zł488k at the EBIT level. On a more positive note, the company does have liquid assets, so it has a bit of time to improve its operations before the debt becomes an acute problem. But we'd want to see some positive free cashflow before spending much time on trying to understand the stock. Having said that the rate of revenue growth will likely impress the market, greatly facilitating any potential capital raising, if required. So it's risky, but with some potential. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example 01Cyberaton Proenergy has 4 warning signs (and 2 which make us uncomfortable) we think you should know about.

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.