Is Loomis (STO:LOOMIS) A Risky Investment?

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. Importantly, Loomis AB (publ) (STO:LOOMIS) does carry debt. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

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. If things get really bad, the lenders can take control of the business. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Loomis's Net Debt?

The image below, which you can click on for greater detail, shows that Loomis had debt of kr7.37b at the end of June 2025, a reduction from kr7.75b over a year. But on the other hand it also has kr7.91b in cash, leading to a kr540.0m net cash position.

How Healthy Is Loomis' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Loomis had liabilities of kr13.4b due within 12 months and liabilities of kr13.1b due beyond that. On the other hand, it had cash of kr7.91b and kr4.10b worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by kr14.5b.

This deficit isn't so bad because Loomis is worth kr27.6b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. Despite its noteworthy liabilities, Loomis boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Loomis

If Loomis can keep growing EBIT at last year's rate of 20% over the last year, then it will find its debt load easier to manage. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Loomis can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. While Loomis has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, Loomis recorded free cash flow worth a fulsome 100% of its EBIT, which is stronger than we'd usually expect. That puts it in a very strong position to pay down debt.

Summing Up

While Loomis does have more liabilities than liquid assets, it also has net cash of kr540.0m. The cherry on top was that in converted 100% of that EBIT to free cash flow, bringing in kr3.6b. So we are not troubled with Loomis's debt use. 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 instance, we've identified 1 warning sign for Loomis that you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.