Would EasyFill AB (publ.) (NGM:EASY B) Be Better Off With Less Debt?

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. We note that EasyFill AB (publ.) (NGM:EASY B) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

When Is Debt A Problem?

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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

See our latest analysis for EasyFill AB (publ.)

What Is EasyFill AB (publ.)'s Net Debt?

The image below, which you can click on for greater detail, shows that EasyFill AB (publ.) had debt of kr20.9m at the end of December 2020, a reduction from kr22.1m over a year. However, it also had kr5.27m in cash, and so its net debt is kr15.6m.

How Healthy Is EasyFill AB (publ.)'s Balance Sheet?

Zooming in on the latest balance sheet data, we can see that EasyFill AB (publ.) had liabilities of kr34.1m due within 12 months and liabilities of kr2.70m due beyond that. On the other hand, it had cash of kr5.27m and kr13.1m worth of receivables due within a year. So it has liabilities totalling kr18.5m more than its cash and near-term receivables, combined.

Given EasyFill AB (publ.) has a market capitalization of kr176.0m, it's hard to believe these liabilities pose much 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 EasyFill AB (publ.) 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.

Over 12 months, EasyFill AB (publ.) 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 EasyFill AB (publ.) produced an earnings before interest and tax (EBIT) loss. Indeed, it lost kr15m 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. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled kr21m in negative free cash flow over the last twelve months. So suffice it to say we consider the stock very risky. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For example EasyFill AB (publ.) has 5 warning signs (and 2 which are significant) 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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