Does Bactiguard Holding (STO:BACTI B) 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.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that Bactiguard Holding AB (publ) (STO:BACTI B) does have debt on its balance sheet. But is this debt a concern to shareholders?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for Bactiguard Holding

How Much Debt Does Bactiguard Holding Carry?

You can click the graphic below for the historical numbers, but it shows that Bactiguard Holding had kr178.9m of debt in June 2022, down from kr193.6m, one year before. But it also has kr201.2m in cash to offset that, meaning it has kr22.3m net cash.

How Strong Is Bactiguard Holding's Balance Sheet?

The latest balance sheet data shows that Bactiguard Holding had liabilities of kr79.2m due within a year, and liabilities of kr235.3m falling due after that. Offsetting this, it had kr201.2m in cash and kr63.6m in receivables that were due within 12 months. So it has liabilities totalling kr49.8m more than its cash and near-term receivables, combined.

This state of affairs indicates that Bactiguard Holding's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the kr3.50b company is short on cash, but still worth keeping an eye on the balance sheet. While it does have liabilities worth noting, Bactiguard Holding also has more cash than debt, so we're pretty confident it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Bactiguard Holding will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

In the last year Bactiguard Holding had a loss before interest and tax, and actually shrunk its revenue by 3.4%, to kr196m. We would much prefer see growth.

So How Risky Is Bactiguard Holding?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And we do note that Bactiguard Holding had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through kr13m of cash and made a loss of kr66m. With only kr22.3m on the balance sheet, it would appear that its going to need to raise capital again soon. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. 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. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Bactiguard Holding (of which 1 can't be ignored!) 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.