AAC Clyde Space (STO:AAC) Has Debt But No Earnings; Should You Worry?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. We can see that AAC Clyde Space AB (publ) (STO:AAC) does use debt in its business. But the more important question is: how much risk is that debt creating?

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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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is AAC Clyde Space's Net Debt?

The image below, which you can click on for greater detail, shows that at September 2025 AAC Clyde Space had debt of kr20.3m, up from none in one year. But it also has kr21.5m in cash to offset that, meaning it has kr1.19m net cash.

How Healthy Is AAC Clyde Space's Balance Sheet?

We can see from the most recent balance sheet that AAC Clyde Space had liabilities of kr190.9m falling due within a year, and liabilities of kr33.5m due beyond that. On the other hand, it had cash of kr21.5m and kr68.6m worth of receivables due within a year. So its liabilities total kr134.2m more than the combination of its cash and short-term receivables.

AAC Clyde Space has a market capitalization of kr573.3m, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. While it does have liabilities worth noting, AAC Clyde Space 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 ultimately the future profitability of the business will decide if AAC Clyde Space can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Check out our latest analysis for AAC Clyde Space

Over 12 months, AAC Clyde Space reported revenue of kr385m, which is a gain of 26%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability.

So How Risky Is AAC Clyde Space?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year AAC Clyde Space had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of kr49m and booked a kr23m accounting loss. Given it only has net cash of kr1.19m, the company may need to raise more capital if it doesn't reach break-even soon. With very solid revenue growth in the last year, AAC Clyde Space may be on a path to profitability. Pre-profit companies are often risky, but they can also offer great rewards. 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 instance, we've identified 3 warning signs for AAC Clyde Space (1 doesn't sit too well with us) you should be aware of.

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.