David Iben put it well when he said, “Volatility is not a risk that interests us. Our aim is to avoid the permanent loss of capital. ‘ When we think about how risky a business is, we always like to look at the use of debt, as over-indebtedness can lead to ruin. As with many other companies Trust International AB (Ed.) (STO: CONF) takes advantage of debt. But the more important question is, what is the risk this debt poses?
When is debt a problem?
In general, debt doesn’t become a real problem until a company can’t simply pay it off, whether through raising capital or using its own cash flow. When things get really bad, lenders can take control of the business. However, a more common (but still costly) occurrence is when a company has to issue stocks at bargain prices, which permanently dilutes shareholders just to prop up its balance sheet. Of course, debt can be an important tool in any business, especially in capital-intensive companies. The first thing to do when considering how much debt a company uses is to put its cash and debt together.
What is the debt of Confidence International AB (publ.)?
The picture below, which you can click for more details, shows that Confidence International AB (published) had a debt of 33.3 million kr in December 2020, compared to 24.2 million kr one year. However, since it has a cash reserve of 5.92 million kr. his net debt is around 27.4 million kr. less.
How healthy is the balance sheet of Confidence International AB (publ.)?
If we zoom in on the latest balance sheet data, we can see that Confidence International AB (publ.) Had liabilities of 62.2 million kr and beyond that, liabilities of 11.7 million kr within 12 months. To settle these obligations, it had cash in the amount of 5.92 million kr. As well as receivables to the value of 30.4 million kr., Which are due within 12 months. So it has liabilities totaling 37.6 million kr. more than his cash and short-term accounts receivable combined.
Given that this deficit is actually higher than the company’s market capitalization of 36.1 million kr, we think that shareholders should really watch out for the debt of Confidence International AB (publ.), Like parents who care for their child seeing a bike ride for the first time. Hypothetically, an extremely large amount of dilution would be required if the company were forced to pay its debt by raising capital at the current share price. When analyzing debt levels, the obvious starting point is the balance sheet. But it is the result of Confidence International AB (publ.) That will influence the future development of the balance sheet. So when looking at debt, it’s definitely worth taking a look at earnings trends. Click here for an interactive snapshot.
Last year Confidence International AB (publ.) Was not profitable at the EBIT level, but increased its sales by 8.8% to 100 million kr. increase. This rate of growth is a bit slow for our tastes, but it takes all kinds to create a world.
It is important that Confidence International AB (publ.) Posted earnings before interest and taxes (EBIT) last year. The EBIT loss was a whopping 15 million kr. When you consider that in addition to the above liabilities, the company makes us nervous. We’d like to see some strong short-term improvement before we get too interested in the stock. Not least because last year it burned 3.5 million kr in negative free cash flow. That said, it’s on the risky side of things. Undoubtedly, we learn most about balance sheet debt. But ultimately, any business can involve off-balance sheet risks. For example we discovered 4 warning signs for Confidence International AB (Ed.) (2 make us uncomfortable!) Things You Should Know Before Investing Here.
After all that, if you’re more interested in a fast-growing company with a rock-solid balance sheet, stop by our list of net cash growth stocks without delay.
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