Does Concejo (STO:CNCJO B) 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.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We note that Concejo AB (publ) (STO:CNCJO B) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. 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.

What Is Concejo's Net Debt?

As you can see below, Concejo had kr46.5m of debt at December 2024, down from kr59.5m a year prior. But on the other hand it also has kr196.8m in cash, leading to a kr150.3m net cash position.

How Healthy Is Concejo's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Concejo had liabilities of kr223.1m due within 12 months and liabilities of kr95.7m due beyond that. Offsetting these obligations, it had cash of kr196.8m as well as receivables valued at kr186.8m due within 12 months. So it can boast kr64.8m more liquid assets than total liabilities.

This surplus suggests that Concejo is using debt in a way that is appears to be both safe and conservative. Due to its strong net asset position, it is not likely to face issues with its lenders. Succinctly put, Concejo boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Concejo 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 .

See our latest analysis for Concejo

In the last year Concejo wasn't profitable at an EBIT level, but managed to grow its revenue by 7.7%, to kr576m. We usually like to see faster growth from unprofitable companies, but each to their own.

So How Risky Is Concejo?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Concejo had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of kr28m and booked a kr46m accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of kr150.3m. That means it could keep spending at its current rate for more than two years. Overall, its balance sheet doesn't seem overly risky, at the moment, but we're always cautious until we see the positive free cash flow. 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. For example - Concejo has 1 warning sign we think 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.