Here's Why Nordic Flanges Group (STO:NFGAB) Can Afford Some Debt

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' 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. As with many other companies Nordic Flanges Group AB (publ) (STO:NFGAB) makes use of debt. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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.

How Much Debt Does Nordic Flanges Group Carry?

You can click the graphic below for the historical numbers, but it shows that as of September 2025 Nordic Flanges Group had kr39.9m of debt, an increase on kr36.1m, over one year. However, because it has a cash reserve of kr11.4m, its net debt is less, at about kr28.5m.

How Strong Is Nordic Flanges Group's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Nordic Flanges Group had liabilities of kr88.5m due within 12 months and liabilities of kr8.26m due beyond that. Offsetting this, it had kr11.4m in cash and kr17.3m in receivables that were due within 12 months. So its liabilities total kr68.1m more than the combination of its cash and short-term receivables.

Given Nordic Flanges Group has a market capitalization of kr2.23b, 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. Carrying virtually no net debt, Nordic Flanges Group has a very light debt load indeed. There's no doubt that we learn most about debt from the balance sheet. But it is Nordic Flanges Group's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Nordic Flanges Group

Over 12 months, Nordic Flanges Group made a loss at the EBIT level, and saw its revenue drop to kr102m, which is a fall of 56%. To be frank that doesn't bode well.

Caveat Emptor

While Nordic Flanges Group's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Indeed, it lost kr5.4m 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. For example, we would not want to see a repeat of last year's loss of kr8.9m. So to be blunt we do think it is risky. 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 3 warning signs with Nordic Flanges Group (at least 2 which are potentially serious) , and understanding them should be part of your investment process.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.