Does TNS energo Mari El (MCX:MISB) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Public Joint-stock Company TNS energo Mari El (MCX:MISB) does carry debt. But the real question is whether this debt is making the company risky.

What Risk Does Debt Bring?

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. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for TNS energo Mari El

How Much Debt Does TNS energo Mari El Carry?

The image below, which you can click on for greater detail, shows that TNS energo Mari El had debt of ₽547.1m at the end of June 2021, a reduction from ₽1.00b over a year. However, it also had ₽44.6m in cash, and so its net debt is ₽502.5m.

How Healthy Is TNS energo Mari El's Balance Sheet?

According to the last reported balance sheet, TNS energo Mari El had liabilities of ₽1.29b due within 12 months, and liabilities of ₽2.58m due beyond 12 months. Offsetting this, it had ₽44.6m in cash and ₽1.22b in receivables that were due within 12 months. So its liabilities total ₽32.1m more than the combination of its cash and short-term receivables.

Having regard to TNS energo Mari El's size, it seems that its liquid assets are well balanced with its total liabilities. So it's very unlikely that the ₽1.91b company is short on cash, but still worth keeping an eye on the balance sheet. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since TNS energo Mari El will need earnings to service that debt. 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 TNS energo Mari El wasn't profitable at an EBIT level, but managed to grow its revenue by 3.3%, to ₽8.5b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months TNS energo Mari El produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at ₽49m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. Surprisingly, we note that it actually reported positive free cash flow of ₽565m and a profit of ₽69m. So one might argue that there's still a chance it can get things on the right track. 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. We've identified 5 warning signs with TNS energo Mari El (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

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.

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.

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