Would voxeljet (NASDAQ:VJET) Be Better Off With Less Debt?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 note that voxeljet AG (NASDAQ:VJET) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

When Is Debt A Problem?

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 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. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

See our latest analysis for voxeljet

How Much Debt Does voxeljet Carry?

As you can see below, at the end of March 2021, voxeljet had €23.4m of debt, up from €17.6m a year ago. Click the image for more detail. However, it does have €20.2m in cash offsetting this, leading to net debt of about €3.11m.

How Healthy Is voxeljet's Balance Sheet?

According to the last reported balance sheet, voxeljet had liabilities of €9.21m due within 12 months, and liabilities of €29.4m due beyond 12 months. On the other hand, it had cash of €20.2m and €4.39m worth of receivables due within a year. So its liabilities total €14.0m more than the combination of its cash and short-term receivables.

While this might seem like a lot, it is not so bad since voxeljet has a market capitalization of €66.9m, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. 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 voxeljet 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.

Over 12 months, voxeljet made a loss at the EBIT level, and saw its revenue drop to €22m, which is a fall of 5.1%. That's not what we would hope to see.

Caveat Emptor

Importantly, voxeljet had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable €12m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through €4.6m of cash over the last year. So suffice it to say we consider the stock very risky. 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. Case in point: We've spotted 4 warning signs for voxeljet you should be aware of, and 1 of them is potentially serious.

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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