Does ES Energy Save Holding (STO:ESGR 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 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. We can see that ES Energy Save Holding AB (publ) (STO:ESGR B) does use debt in its business. But is this debt a concern to shareholders?

Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. 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. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

See our latest analysis for ES Energy Save Holding

How Much Debt Does ES Energy Save Holding Carry?

The chart below, which you can click on for greater detail, shows that ES Energy Save Holding had kr21.3m in debt in October 2024; about the same as the year before. But on the other hand it also has kr48.3m in cash, leading to a kr27.0m net cash position.

A Look At ES Energy Save Holding's Liabilities

The latest balance sheet data shows that ES Energy Save Holding had liabilities of kr59.7m due within a year, and liabilities of kr7.17m falling due after that. Offsetting this, it had kr48.3m in cash and kr35.9m in receivables that were due within 12 months. So it can boast kr17.3m more liquid assets than total liabilities.

This surplus suggests that ES Energy Save Holding has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Succinctly put, ES Energy Save Holding boasts net cash, so it's fair to say it does not have a heavy debt load! When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine ES Energy Save Holding's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Over 12 months, ES Energy Save Holding reported revenue of kr252m, which is a gain of 23%, although it did not report any earnings before interest and tax. Shareholders probably have their fingers crossed that it can grow its way to profits.

So How Risky Is ES Energy Save Holding?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months ES Energy Save Holding lost money at the earnings before interest and tax (EBIT) line. Indeed, in that time it burnt through kr48m of cash and made a loss of kr19m. Given it only has net cash of kr27.0m, the company may need to raise more capital if it doesn't reach break-even soon. With very solid revenue growth in the last year, ES Energy Save Holding may be on a path to profitability. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 3 warning signs we've spotted with ES Energy Save Holding .

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.