Does Transfer Group (NGM:TRNSF) Have A Healthy Balance Sheet?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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. We note that Transfer Group AB (publ) (NGM:TRNSF) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Transfer Group Carry?

The image below, which you can click on for greater detail, shows that at March 2025 Transfer Group had debt of kr46.8m, up from kr22.5m in one year. However, it does have kr4.06m in cash offsetting this, leading to net debt of about kr42.7m.

How Healthy Is Transfer Group's Balance Sheet?

The latest balance sheet data shows that Transfer Group had liabilities of kr73.8m due within a year, and liabilities of kr55.8m falling due after that. Offsetting these obligations, it had cash of kr4.06m as well as receivables valued at kr26.2m due within 12 months. So it has liabilities totalling kr99.4m more than its cash and near-term receivables, combined.

The deficiency here weighs heavily on the kr56.1m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. At the end of the day, Transfer Group would probably need a major re-capitalization if its creditors were to demand repayment. When analysing debt levels, the balance sheet is the obvious place to start. But it is Transfer 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.

See our latest analysis for Transfer Group

In the last year Transfer Group wasn't profitable at an EBIT level, but managed to grow its revenue by 29%, to kr177m. With any luck the company will be able to grow its way to profitability.

Caveat Emptor

Despite the top line growth, Transfer Group still had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping kr48m. Considering that alongside the liabilities mentioned above make us nervous about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it had negative free cash flow of kr11m over the last twelve months. That means it's on the risky side of things. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 3 warning signs for Transfer Group that you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.