Would SBF (FRA:CY1K) Be Better Off With Less Debt?

Simply Wall St · 06/10 04:05

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. As with many other companies SBF AG (FRA:CY1K) makes use of debt. But the more important question is: how much risk is that debt creating?

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is SBF's Net Debt?

As you can see below, at the end of December 2024, SBF had €9.16m of debt, up from €6.08m a year ago. Click the image for more detail. However, because it has a cash reserve of €6.73m, its net debt is less, at about €2.43m.

debt-equity-history-analysis
DB:CY1K Debt to Equity History June 10th 2025

A Look At SBF's Liabilities

We can see from the most recent balance sheet that SBF had liabilities of €7.54m falling due within a year, and liabilities of €10.3m due beyond that. Offsetting this, it had €6.73m in cash and €3.25m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €7.88m.

Given SBF has a market capitalization of €62.6m, it's hard to believe these liabilities pose much threat. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. 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 SBF's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

See our latest analysis for SBF

In the last year SBF wasn't profitable at an EBIT level, but managed to grow its revenue by 39%, to €47m. Shareholders probably have their fingers crossed that it can grow its way to profits.

Caveat Emptor

Despite the top line growth, SBF still had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at €1.0m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through €2.8m of cash over the last year. So to be blunt we think it is risky. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 2 warning signs for SBF (1 can't be ignored) you should be aware of.

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.