Does Energoprojekt Holding a.d (BELEX:ENHL) Have A Healthy Balance Sheet?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. Importantly, Energoprojekt Holding a.d. (BELEX:ENHL) does carry debt. But should shareholders be worried about its use of debt?

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. 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.

See our latest analysis for Energoprojekt Holding a.d

What Is Energoprojekt Holding a.d's Net Debt?

The image below, which you can click on for greater detail, shows that Energoprojekt Holding a.d had debt of дин4.28b at the end of June 2023, a reduction from дин4.55b over a year. But on the other hand it also has дин5.55b in cash, leading to a дин1.26b net cash position.

A Look At Energoprojekt Holding a.d's Liabilities

The latest balance sheet data shows that Energoprojekt Holding a.d had liabilities of дин11.7b due within a year, and liabilities of дин5.06b falling due after that. On the other hand, it had cash of дин5.55b and дин9.62b worth of receivables due within a year. So its liabilities total дин1.54b more than the combination of its cash and short-term receivables.

Energoprojekt Holding a.d has a market capitalization of дин3.80b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. While it does have liabilities worth noting, Energoprojekt Holding a.d also has more cash than debt, so we're pretty confident it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is Energoprojekt Holding a.d'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.

In the last year Energoprojekt Holding a.d had a loss before interest and tax, and actually shrunk its revenue by 23%, to дин12b. To be frank that doesn't bode well.

So How Risky Is Energoprojekt Holding a.d?

Although Energoprojekt Holding a.d had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of дин2.4b. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. With revenue growth uninspiring, we'd really need to see some positive EBIT before mustering much enthusiasm for this business. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that Energoprojekt Holding a.d is showing 3 warning signs in our investment analysis , and 2 of those are potentially serious...

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.