Yahoo Finance Does S.S. Lazio (BIT:SSL) Have A Healthy Balance Sheet?
Warren Buffett famously said, 'Volatility is far from synonymous with risk.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We note that S.S. Lazio S.p.A. (BIT:SSL) does have debt on its balance sheet. But is this debt a concern to shareholders?
What Risk Does Debt Bring?
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. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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 S.S. Lazio
How Much Debt Does S.S. Lazio Carry?
As you can see below, S.S. Lazio had €46.0m of debt, at December 2018, which is about the same the year before. You can click the chart for greater detail. However, it also had €6.44m in cash, and so its net debt is €39.5m.
How Healthy Is S.S. Lazio's Balance Sheet?
The latest balance sheet data shows that S.S. Lazio had liabilities of €134.5m due within a year, and liabilities of €101.6m falling due after that. On the other hand, it had cash of €6.44m and €77.0m worth of receivables due within a year. So its liabilities total €152.6m more than the combination of its cash and short-term receivables.
The deficiency here weighs heavily on the €82.5m company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet." So we'd watch its balance sheet closely, without a doubt After all, S.S. Lazio would likely require a major re-capitalisation if it had to pay its creditors today. There's no doubt that we learn most about debt from the balance sheet. But it is S.S. Lazio's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.
In the last year S.S. Lazio wasn't profitable at an EBIT level, but managed to grow its revenue by15%, to €129m. That rate of growth is a bit slow for our taste, but it takes all types to make a world.
Caveat Emptor
Importantly, S.S. Lazio had negative earnings before interest and tax (EBIT), over the last year. Its EBIT loss was a whopping €19m. Considering that alongside the liabilities mentioned above make us nervous about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. For example, we would not want to see a repeat of last year's loss of €1.9m. And until that time we think this is a risky stock. For riskier companies like S.S. Lazio 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 you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.
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