Health Check: How Prudently Does Gasporox (STO:GPX) Use Debt?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 note that Gasporox AB (publ) (STO:GPX) does have debt on its balance sheet. But is this debt a concern to shareholders?

Our free stock report includes 2 warning signs investors should be aware of before investing in Gasporox. Read for free now.

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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.

How Much Debt Does Gasporox Carry?

As you can see below, at the end of March 2025, Gasporox had kr14.8m of debt, up from kr1.86m a year ago. Click the image for more detail. But it also has kr17.9m in cash to offset that, meaning it has kr3.13m net cash.

How Strong Is Gasporox's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Gasporox had liabilities of kr14.5m due within 12 months and liabilities of kr15.3m due beyond that. Offsetting these obligations, it had cash of kr17.9m as well as receivables valued at kr4.13m due within 12 months. So its liabilities total kr7.80m more than the combination of its cash and short-term receivables.

Since publicly traded Gasporox shares are worth a total of kr67.2m, it seems unlikely that this level of liabilities would be a major threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, Gasporox 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 ultimately the future profitability of the business will decide if Gasporox can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Check out our latest analysis for Gasporox

In the last year Gasporox had a loss before interest and tax, and actually shrunk its revenue by 4.1%, to kr35m. We would much prefer see growth.

So How Risky Is Gasporox?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Gasporox had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through kr4.9m of cash and made a loss of kr7.2m. But the saving grace is the kr3.13m on the balance sheet. That means it could keep spending at its current rate for more than two years. Summing up, we're a little skeptical of this one, as it seems fairly risky in the absence of free cashflow. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For example Gasporox has 2 warning signs (and 1 which is concerning) we think you should know about.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.