Is Natuzzi (NYSE:NTZ) Weighed On By Its Debt Load?

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. We note that Natuzzi S.p.A. (NYSE:NTZ) does have debt on its balance sheet. But is this debt a concern to shareholders?

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Why Does Debt Bring Risk?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Natuzzi Carry?

As you can see below, at the end of September 2025, Natuzzi had €5.40m of debt, up from €3.50m a year ago. Click the image for more detail. But it also has €18.1m in cash to offset that, meaning it has €12.7m net cash.

How Strong Is Natuzzi's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Natuzzi had liabilities of €153.9m due within 12 months and liabilities of €95.0m due beyond that. Offsetting these obligations, it had cash of €18.1m as well as receivables valued at €46.4m due within 12 months. So it has liabilities totalling €184.4m more than its cash and near-term receivables, combined.

This deficit casts a shadow over the €21.2m company, like a colossus towering over mere mortals. So we'd watch its balance sheet closely, without a doubt. After all, Natuzzi would likely require a major re-capitalisation if it had to pay its creditors today. Given that Natuzzi has more cash than debt, we're pretty confident it can handle its debt, despite the fact that it has a lot of liabilities in total. There's no doubt that we learn most about debt from the balance sheet. But it is Natuzzi's earnings that will influence how the balance sheet holds up in the future. 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.

See our latest analysis for Natuzzi

In the last year Natuzzi had a loss before interest and tax, and actually shrunk its revenue by 6.8%, to €306m. We would much prefer see growth.

So How Risky Is Natuzzi?

We have no doubt that loss making companies are, in general, riskier than profitable ones. And in the last year Natuzzi had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of €6.1m and booked a €19m accounting loss. But the saving grace is the €12.7m on the balance sheet. That means it could keep spending at its current rate for more than two years. Overall, we'd say the stock is a bit risky, and we're usually very cautious until we see positive free cash flow. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 3 warning signs we've spotted with Natuzzi (including 1 which is potentially serious) .

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.