Does Sypris Solutions (NASDAQ:SYPR) Have A Healthy Balance Sheet?

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.' 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. We can see that Sypris Solutions, Inc. (NASDAQ:SYPR) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. 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. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Sypris Solutions Carry?

As you can see below, at the end of September 2025, Sypris Solutions had US$13.6m of debt, up from US$11.0m a year ago. Click the image for more detail. However, it does have US$8.44m in cash offsetting this, leading to net debt of about US$5.16m.

How Healthy Is Sypris Solutions' Balance Sheet?

We can see from the most recent balance sheet that Sypris Solutions had liabilities of US$54.7m falling due within a year, and liabilities of US$37.8m due beyond that. Offsetting this, it had US$8.44m in cash and US$12.4m in receivables that were due within 12 months. So its liabilities total US$71.7m more than the combination of its cash and short-term receivables.

Given this deficit is actually higher than the company's market capitalization of US$52.7m, we think shareholders really should watch Sypris Solutions's debt levels, like a parent watching their child ride a bike for the first time. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Sypris Solutions will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

Check out our latest analysis for Sypris Solutions

In the last year Sypris Solutions had a loss before interest and tax, and actually shrunk its revenue by 13%, to US$123m. We would much prefer see growth.

Caveat Emptor

Not only did Sypris Solutions's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). To be specific the EBIT loss came in at US$2.6m. When we look at that alongside the significant liabilities, we're not particularly confident about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it burned through US$3.1m in negative free cash flow over the last year. So suffice it to say we consider the stock to be risky. 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 Sypris Solutions has 2 warning signs (and 1 which makes us a bit uncomfortable) 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.