Is Boozt (STO:BOOZT) Using Too Much Debt?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Boozt AB (publ) (STO:BOOZT) does use debt in its business. But the real question is whether this debt is making the company risky.

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Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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, 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 step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Boozt Carry?

As you can see below, Boozt had kr299.0m of debt at June 2025, down from kr428.0m a year prior. But on the other hand it also has kr376.0m in cash, leading to a kr77.0m net cash position.

How Healthy Is Boozt's Balance Sheet?

According to the last reported balance sheet, Boozt had liabilities of kr1.55b due within 12 months, and liabilities of kr720.0m due beyond 12 months. Offsetting these obligations, it had cash of kr376.0m as well as receivables valued at kr169.0m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by kr1.73b.

While this might seem like a lot, it is not so bad since Boozt has a market capitalization of kr5.36b, 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. Despite its noteworthy liabilities, Boozt boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Boozt

In addition to that, we're happy to report that Boozt has boosted its EBIT by 53%, thus reducing the spectre of future debt repayments. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Boozt'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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Boozt 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. In the last three years, Boozt's free cash flow amounted to 40% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

Although Boozt's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of kr77.0m. And we liked the look of last year's 53% year-on-year EBIT growth. So we don't have any problem with Boozt's use of debt. Of course, we wouldn't say no to the extra confidence that we'd gain if we knew that Boozt insiders have been buying shares: if you're on the same wavelength, you can find out if insiders are buying by clicking this link.

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.