Does New Nordic Healthbrands (STO:NNH) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. Importantly, New Nordic Healthbrands AB (publ) (STO:NNH) does carry debt. 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. If things get really bad, the lenders can take control of the business. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

View our latest analysis for New Nordic Healthbrands

How Much Debt Does New Nordic Healthbrands Carry?

You can click the graphic below for the historical numbers, but it shows that as of December 2024 New Nordic Healthbrands had kr39.2m of debt, an increase on kr28.8m, over one year. On the flip side, it has kr15.2m in cash leading to net debt of about kr24.0m.

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How Healthy Is New Nordic Healthbrands' Balance Sheet?

The latest balance sheet data shows that New Nordic Healthbrands had liabilities of kr145.6m due within a year, and liabilities of kr2.16m falling due after that. On the other hand, it had cash of kr15.2m and kr88.4m worth of receivables due within a year. So it has liabilities totalling kr44.2m more than its cash and near-term receivables, combined.

While this might seem like a lot, it is not so bad since New Nordic Healthbrands has a market capitalization of kr86.7m, and so it could probably strengthen its balance sheet by raising capital if it needed to. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. When analysing debt levels, the balance sheet is the obvious place to start. But it is New Nordic Healthbrands'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.

Over 12 months, New Nordic Healthbrands reported revenue of kr550m, which is a gain of 3.1%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Importantly, New Nordic Healthbrands had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost kr4.4m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through kr9.8m of cash over the last year. So in short it's a really risky stock. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. For example - New Nordic Healthbrands has 2 warning signs we think you should be aware of.

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.