Is Nordic Flanges Group (STO:NFGAB) A Risky Investment?

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.' 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 the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is Nordic Flanges Group's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Nordic Flanges Group had debt of kr48.6m, up from kr36.8m in one year. However, it also had kr24.6m in cash, and so its net debt is kr24.0m.

How Healthy Is Nordic Flanges Group's Balance Sheet?

The latest balance sheet data shows that Nordic Flanges Group had liabilities of kr106.1m due within a year, and liabilities of kr11.5m falling due after that. On the other hand, it had cash of kr24.6m and kr22.2m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by kr70.9m.

This deficit casts a shadow over the kr25.2m company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. After all, Nordic Flanges Group would likely require a major re-capitalisation if it had to pay its creditors today. When analysing debt levels, the balance sheet is the obvious place to start. But it is Nordic Flanges Group's earnings that will influence how the balance sheet holds up in the future. 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 Nordic Flanges Group

Over 12 months, Nordic Flanges Group made a loss at the EBIT level, and saw its revenue drop to kr232m, which is a fall of 8.0%. We would much prefer see growth.

Caveat Emptor

Importantly, Nordic Flanges Group had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable kr11m at the EBIT level. Combining this information with the significant liabilities we already touched on makes us very hesitant about this stock, to say the least. Of course, it may be able to improve its situation with a bit of luck and good execution. But we think that is unlikely since it is low on liquid assets, and made a loss of kr16m in the last year. So while it's not wise to assume the company will fail, we do think it's 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. For example, we've discovered 3 warning signs for Nordic Flanges Group that you should be aware of before investing here.

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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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.