Nilörngruppen (STO:NIL B) Could Easily Take On More Debt

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that '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. We can see that Nilörngruppen AB (STO:NIL B) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Nilörngruppen's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Nilörngruppen had kr57.8m of debt in September 2025, down from kr74.5m, one year before. However, it does have kr118.7m in cash offsetting this, leading to net cash of kr60.9m.

A Look At Nilörngruppen's Liabilities

According to the last reported balance sheet, Nilörngruppen had liabilities of kr239.0m due within 12 months, and liabilities of kr20.1m due beyond 12 months. On the other hand, it had cash of kr118.7m and kr110.0m worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by kr30.4m.

Since publicly traded Nilörngruppen shares are worth a total of kr684.1m, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. While it does have liabilities worth noting, Nilörngruppen also has more cash than debt, so we're pretty confident it can manage its debt safely.

Check out our latest analysis for Nilörngruppen

And we also note warmly that Nilörngruppen grew its EBIT by 16% last year, making its debt load easier to handle. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Nilörngruppen's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Nilörngruppen 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. During the last three years, Nilörngruppen generated free cash flow amounting to a very robust 95% of its EBIT, more than we'd expect. That puts it in a very strong position to pay down debt.

Summing Up

We could understand if investors are concerned about Nilörngruppen's liabilities, but we can be reassured by the fact it has has net cash of kr60.9m. The cherry on top was that in converted 95% of that EBIT to free cash flow, bringing in kr74m. So we don't think Nilörngruppen's use of debt is risky. 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. Case in point: We've spotted 2 warning signs for Nilörngruppen 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.