Does Slottsviken Fastighetsaktiebolag (NGM: SLOTT B) have a healthy track record?
Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett said “volatility is far from risk.” So it can be obvious that you need to consider debt, when you think about how risky a given stock is because too much debt can sink a business. We notice that Slottsviken Fastighetsaktiebolag (publ) (NGM: SLOTT B) has debt on its balance sheet. But should shareholders be concerned about its use of debt?
When is Debt a Problem?
Debts and other liabilities become risky for a business when it cannot easily meet these obligations, either with free cash flow or by raising capital at an attractive price. If things really go wrong, lenders can take over the business. However, a more common (but still costly) event is when a company has to issue stock at bargain prices, constantly diluting shareholders, just to strengthen its balance sheet. Of course, the advantage of debt is that it often represents cheap capital, especially when it replaces dilution in a business with the ability to reinvest at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash flow and debt together.
Check out our latest review for Slottsviken Fastighetsaktiebolag
What is the debt of Slottsviken Fastighetsaktiebolag?
As you can see below, Slottsviken Fastighetsaktiebolag had SEK 26.4 million in debt, as of September 2021, which is roughly the same as the year before. You can click on the graph for more details. However, he has 956.0 kr of cash offsetting this, which leads to net debt of around 25.4 million kr.
How healthy is Slottsviken Fastighetsaktiebolag’s track record?
According to the latest published balance sheet, Slottsviken Fastighetsaktiebolag had liabilities of SEK 6.85 million due within 12 months, and liabilities of SEK 37.8 million due beyond 12 months. In compensation for these obligations, he had cash of 956.0 kr as well as receivables valued at 676.0 kr due within 12 months. Its liabilities therefore total kr 43.0 million more than the combination of its cash and short-term receivables.
Given that this deficit is actually greater than the company’s market cap of SEK 33.4 million, we believe shareholders should really watch Slottsviken Fastighetsaktiebolag’s debt levels, like a parent watching their child do. cycling for the first time. In the event that the company were to clean up its balance sheet quickly, it seems likely that shareholders would suffer significant dilution. When analyzing debt levels, the balance sheet is the obvious place to start. But it is the profits of Slottsviken Fastighetsaktiebolag that will influence the balance sheet in the future. So if you want to know more about its profits, it may be worth checking out this long term profit trend chart.
In the past year, Slottsviken Fastighetsaktiebolag has recorded a loss before interest and taxes and in fact reduced its income by 18%, to 6.1 million crowns. This is not what we hope to see.
Slottsviken Fastighetsaktiebolag’s turnover not only declined over the past twelve months, but it also produced negative profit before interest and taxes (EBIT). To be precise, the EBIT loss amounted to 1.2 million crowns. Considering that aside from the liabilities mentioned above, we are nervous about the business. It would have to improve its operation quickly for us to take an interest in it. Notably because it has had a negative free cash flow of 1.2 million crowns over the past twelve months. That means it’s on the risky side of things. There is no doubt that we learn the most about debt from the balance sheet. However, not all investment risks lie on the balance sheet – far from it. Be aware that Slottsviken Fastighetsaktiebolag shows 3 warning signs in our investment analysis , you must know…
If you want to invest in companies that can generate profits without the burden of debt, check out this free list of growing companies that have net cash on the balance sheet.
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