David Eben put it well when he said: “Volatile is not a risk we care about. What we care about is avoiding permanent loss of capital. When we think about how risky a company is, we always like to look at its use of debt, because an excessive debt load can lead to ruin We noticed that GO internet SpA (BIT: goIt has debts on its balance sheet. But is this debt a concern for shareholders?
When is debt dangerous?
Generally, debt becomes a real problem only when the company cannot pay it easily, either by raising capital or with its own cash flow. An integral part of capitalism is the process of “creative destruction” in which failed companies are ruthlessly liquidated by bankers. However, the more frequent (but still costly) occurrence is where a company must issue shares at bargain low prices, permanently weakening shareholders, just to prop up its balance sheet. By replacing dilution, debt can be a very good tool for companies that need capital to invest in growth at high rates of return. The first step when looking at a company’s debt levels is to consider both liquidity and debt.
How much debt does GO Internet carry?
As you can see below, at the end of June 2022, GO Internet had a debt of €9.03 million, up from €7.95 million last year. Click on the image for more details. However, she also had 742.0 thousand euros in cash, so her net debt is 8.29 million euros.
How strong is GO Internet’s balance sheet?
The latest balance sheet data shows GO internet has liabilities of €9.51 million maturing within a year, and liabilities of €6.63 million maturing thereafter. Against this, she had 742.0 thousand euros in cash and 5.26 million euros in receivables that were due within 12 months. Therefore, its liabilities exceed the sum of cash and receivables (short-term) by €10.1 million.
The imperfection here weighs heavily on the €5.39 million company, as if he were a child struggling under the weight of a massive backpack filled with books, gym equipment, and a trumpet. So we definitely think that shareholders need to monitor this closely. At the end of the day, GO internet will likely need a major recapitalization if its creditors demand repayment. When analyzing debt levels, the balance sheet is the obvious place to start. But you cannot view debts in complete solitude; Because GO Internet will need earnings to service this debt. So when considering debt, it’s definitely worth looking at the earnings trend. Click here for an interactive screenshot.
Last year, GO internet was not profitable at the EBIT level, but it managed to increase its revenue by 46% to 11 million euros. With any luck, the company will be able to develop its path towards profitability.
Despite the higher growth, GO internet still generated EBIT over the past year. Its EBIT loss was €2.1 million. Given that besides the above-mentioned commitments make us worried about the company. You’ll need to quickly improve their operations so we can take care of them. Not least because he has had a negative free cash flow of €509,000 over the past twelve months. This means he’s on the risky side of things. There is no doubt that we learn more about debt from the balance sheet. But in the end, every company can have off-balance sheet risks. Case in point: We spotted 3 Warning Signs for GO internet You should be aware, 2 of them are alarming.
When all is said and done, sometimes it’s easier to focus on companies that don’t even need debt. Readers can access a file List of developing stocks with net zero debt 100% freeImmediately.
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This article by Simply Wall St is general in nature. We provide comments based only on historical data and analyst expectations using an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock, nor does it take into account your objectives or financial situation. We aim to provide you with focused, long-term analysis driven by essential data. Note that our analysis may not include the company’s most recent price-sensitive ads or quality materials. Wall Street simply has no position in any of the stocks mentioned.
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