In This Article:
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. Importantly, Blue Solutions Société Anonyme (EPA:BLUE) does carry debt. But the more important question is: how much risk is that debt creating?
What Risk Does Debt Bring?
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. 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. The first step when considering a company's debt levels is to consider its cash and debt together.
Check out our latest analysis for Blue Solutions Société Anonyme
What Is Blue Solutions Société Anonyme's Debt?
The image below, which you can click on for greater detail, shows that at June 2019 Blue Solutions Société Anonyme had debt of €78.2m, up from €48.1m in one year. However, it does have €4.28m in cash offsetting this, leading to net debt of about €74.0m.
How Healthy Is Blue Solutions Société Anonyme's Balance Sheet?
According to the last reported balance sheet, Blue Solutions Société Anonyme had liabilities of €69.5m due within 12 months, and liabilities of €51.7m due beyond 12 months. On the other hand, it had cash of €4.28m and €15.9m worth of receivables due within a year. So it has liabilities totalling €101.0m more than its cash and near-term receivables, combined.
Blue Solutions Société Anonyme has a market capitalization of €488.5m, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. When analysing debt levels, the balance sheet is the obvious place to start. But you can't view debt in total isolation; since Blue Solutions Société Anonyme 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.