Is Gasporox (STO:GPX) Using Debt In A Risky Way?

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.' 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. As with many other companies Gasporox AB (publ) (STO:GPX) makes use of debt. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

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 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.

What Is Gasporox's Net Debt?

The image below, which you can click on for greater detail, shows that at March 2025 Gasporox had debt of kr14.8m, up from kr1.86m in one year. But it also has kr17.9m in cash to offset that, meaning it has kr3.13m net cash.

A Look At Gasporox's Liabilities

The latest balance sheet data shows that Gasporox had liabilities of kr14.5m due within a year, and liabilities of kr15.3m falling due after that. Offsetting this, it had kr17.9m in cash and kr4.13m in receivables that were due within 12 months. So it has liabilities totalling kr7.80m more than its cash and near-term receivables, combined.

Of course, Gasporox has a market capitalization of kr66.6m, so these liabilities are probably manageable. 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 it is Gasporox'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.

View our latest analysis for Gasporox

In the last year Gasporox had a loss before interest and tax, and actually shrunk its revenue by 3.7%, 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. While this does make the company a bit risky, it's important to remember it has net cash of kr3.13m. 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. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example Gasporox has 3 warning signs (and 2 which can't be ignored) we think you should know about.

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.