Pricer (STO:PRIC B) Seems To Use Debt Rather Sparingly

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the 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 note that Pricer AB (publ) (STO:PRIC B) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Pricer's Net Debt?

As you can see below, at the end of March 2025, Pricer had kr292.5m of debt, up from kr243.5m a year ago. Click the image for more detail. However, it does have kr349.3m in cash offsetting this, leading to net cash of kr56.8m.

How Healthy Is Pricer's Balance Sheet?

According to the last reported balance sheet, Pricer had liabilities of kr664.4m due within 12 months, and liabilities of kr361.5m due beyond 12 months. Offsetting this, it had kr349.3m in cash and kr503.3m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by kr173.3m.

This deficit isn't so bad because Pricer is worth kr749.1m, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. While it does have liabilities worth noting, Pricer also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for Pricer

Notably, Pricer's EBIT launched higher than Elon Musk, gaining a whopping 250% on last year. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Pricer'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.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. Pricer may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. During the last three years, Pricer generated free cash flow amounting to a very robust 87% of its EBIT, more than we'd expect. That puts it in a very strong position to pay down debt.

Summing Up

Although Pricer's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of kr56.8m. And it impressed us with free cash flow of kr160m, being 87% of its EBIT. So we don't think Pricer's use of debt is risky. 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. We've identified 2 warning signs with Pricer , and understanding them should be part of your investment process.

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.