public-stock company Tomsk distribution (MCX:TORS) Is Making Moderate Use Of Debt

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 can see that public-stock company Tomsk distribution company (MCX:TORS) does use debt in its business. But the more important question is: how much risk is that debt creating?

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. If things get really bad, the lenders can take control of the business. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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.

View our latest analysis for public-stock company Tomsk distribution

What Is public-stock company Tomsk distribution's Debt?

You can click the graphic below for the historical numbers, but it shows that as of September 2021 public-stock company Tomsk distribution had ₽147.7m of debt, an increase on ₽74.1m, over one year. However, it does have ₽63.1m in cash offsetting this, leading to net debt of about ₽84.6m.

How Strong Is public-stock company Tomsk distribution's Balance Sheet?

The latest balance sheet data shows that public-stock company Tomsk distribution had liabilities of ₽835.5m due within a year, and liabilities of ₽216.7m falling due after that. Offsetting these obligations, it had cash of ₽63.1m as well as receivables valued at ₽360.8m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by ₽628.3m.

This deficit isn't so bad because public-stock company Tomsk distribution is worth ₽1.42b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine public-stock company Tomsk distribution's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, public-stock company Tomsk distribution saw its revenue hold pretty steady, and it did not report positive earnings before interest and tax. While that's not too bad, we'd prefer see growth.

Caveat Emptor

Over the last twelve months public-stock company Tomsk distribution produced an earnings before interest and tax (EBIT) loss. Indeed, it lost a very considerable ₽163m at the EBIT level. 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. Another cause for caution is that is bled ₽182m in negative free cash flow over the last twelve months. So in short it's a really risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that public-stock company Tomsk distribution is showing 2 warning signs in our investment analysis , you should know about...

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.

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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.