Does SolTech Energy Sweden (STO:SOLT) Have A Healthy Balance Sheet?

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 seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. As with many other companies SolTech Energy Sweden AB (publ) (STO:SOLT) makes use of debt. But is this debt a concern to shareholders?

What Risk Does Debt Bring?

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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for SolTech Energy Sweden

How Much Debt Does SolTech Energy Sweden Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2023 SolTech Energy Sweden had kr163.2m of debt, an increase on kr95.4m, over one year. But it also has kr233.8m in cash to offset that, meaning it has kr70.6m net cash.

A Look At SolTech Energy Sweden's Liabilities

Zooming in on the latest balance sheet data, we can see that SolTech Energy Sweden had liabilities of kr732.8m due within 12 months and liabilities of kr573.5m due beyond that. Offsetting these obligations, it had cash of kr233.8m as well as receivables valued at kr510.5m due within 12 months. So its liabilities total kr562.0m more than the combination of its cash and short-term receivables.

SolTech Energy Sweden has a market capitalization of kr1.46b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. While it does have liabilities worth noting, SolTech Energy Sweden 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 it is SolTech Energy Sweden'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.

In the last year SolTech Energy Sweden wasn't profitable at an EBIT level, but managed to grow its revenue by 118%, to kr2.3b. So there's no doubt that shareholders are cheering for growth

So How Risky Is SolTech Energy Sweden?

Statistically speaking companies that lose money are riskier than those that make money. And the fact is that over the last twelve months SolTech Energy Sweden lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through kr209m of cash and made a loss of kr259m. With only kr70.6m on the balance sheet, it would appear that its going to need to raise capital again soon. Importantly, SolTech Energy Sweden's revenue growth is hot to trot. While unprofitable companies can be risky, they can also grow hard and fast in those pre-profit years. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 3 warning signs for SolTech Energy Sweden (2 shouldn't be ignored!) 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.