Does MYT Netherlands Parent B.V (NYSE:MYTE) Have A Healthy Balance Sheet?

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 can see that MYT Netherlands Parent B.V. (NYSE:MYTE) does use debt in its business. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

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. 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.

View our latest analysis for MYT Netherlands Parent B.V

How Much Debt Does MYT Netherlands Parent B.V Carry?

You can click the graphic below for the historical numbers, but it shows that as of September 2024 MYT Netherlands Parent B.V had €25.3m of debt, an increase on €16.4m, over one year. However, it does have €9.11m in cash offsetting this, leading to net debt of about €16.2m.

A Look At MYT Netherlands Parent B.V's Liabilities

We can see from the most recent balance sheet that MYT Netherlands Parent B.V had liabilities of €215.4m falling due within a year, and liabilities of €43.5m due beyond that. Offsetting this, it had €9.11m in cash and €11.2m in receivables that were due within 12 months. So it has liabilities totalling €238.6m more than its cash and near-term receivables, combined.

This deficit isn't so bad because MYT Netherlands Parent B.V is worth €630.8m, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine MYT Netherlands Parent B.V's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Over 12 months, MYT Netherlands Parent B.V reported revenue of €855m, which is a gain of 10.0%, although it did not report any earnings before interest and tax. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Over the last twelve months MYT Netherlands Parent B.V produced an earnings before interest and tax (EBIT) loss. Indeed, it lost €6.8m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. We would feel better if it turned its trailing twelve month loss of €36m into a profit. So to be blunt we do think it is risky. For riskier companies like MYT Netherlands Parent B.V I always like to keep an eye on the long term profit and revenue trends. Fortunately, you can click to see our interactive graph of its profit, revenue, and operating cashflow.

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.

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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.