Does SaltX Technology Holding (STO:SALT B) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Importantly, SaltX Technology Holding AB (publ) (STO:SALT B) does carry debt. But is this debt a concern to shareholders?

When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

Check out our latest analysis for SaltX Technology Holding

What Is SaltX Technology Holding's Debt?

The chart below, which you can click on for greater detail, shows that SaltX Technology Holding had kr26.5m in debt in December 2022; about the same as the year before. However, its balance sheet shows it holds kr74.3m in cash, so it actually has kr47.8m net cash.

How Healthy Is SaltX Technology Holding's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that SaltX Technology Holding had liabilities of kr12.4m due within 12 months and liabilities of kr28.9m due beyond that. Offsetting this, it had kr74.3m in cash and kr2.23m in receivables that were due within 12 months. So it can boast kr35.2m more liquid assets than total liabilities.

This short term liquidity is a sign that SaltX Technology Holding could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, SaltX Technology Holding boasts net cash, so it's fair to say it does not have a heavy debt load! The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since SaltX Technology Holding will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Over 12 months, SaltX Technology Holding made a loss at the EBIT level, and saw its revenue drop to kr607k, which is a fall of 97%. To be frank that doesn't bode well.

So How Risky Is SaltX Technology Holding?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months SaltX Technology Holding lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through kr49m of cash and made a loss of kr59m. However, it has net cash of kr47.8m, so it has a bit of time before it will need more capital. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. 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 SaltX Technology Holding has 4 warning signs (and 1 which is concerning) 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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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.