Warren Buffett famously said, “Volatility is not synonymous with risk.” Debt is often incurred when a business goes bankrupt, so it makes sense to consider a company’s balance sheet when considering a company’s risks. Importantly, ATOSS Software AG (ETR:AOF) is in debt. But should shareholders worry about the use of debt?
When does debt become a problem
Debt is a tool that helps companies grow, but if companies can’t pay back their lenders, they exist at their mercy. Ultimately, shareholders may walk away with nothing if the company fails to meet its legal obligations to repay its debts. But a more common (but still costly) situation is when a company has to dilute its shareholders with a cheap stock price just to manage its debt. That said, the most common situation is when a company manages its debt reasonably well to its advantage. The first thing to do when considering how much debt a business is using is to look at cash and debt together.
See the latest analysis of ATOSS software.
How much debt does ATOSS software have?
The image below, which you can click for more information, shows that as of June 2022, ATOSS Software was between €9.56 million and €10.9 million in debt in one year. But he also has €39.9 million in cash to offset it. So we have a net cash of €29 million.
ATOSS Software Liability
According to the latest balance sheet data, ATOSS Software had a debt of €20.5 million within the first year and has incurred a debt of €17.8 million since then. Offsetting these debts was €39.9 million in cash and his €10.1 million debt due within 12 months.So we actually have 11.7 million euros more Current assets over total liabilities.
Considering ATOSS Software’s size, its current assets and total liabilities appear to be well balanced. So while it’s hard to imagine a €1.12bn company suffering from a cash shortage, we think it’s worth keeping an eye on its balance sheet. In short, ATOSS Software boasts net cash, so it’s safe to say they don’t have a lot of debt!
The good news is that ATOSS Software increased EBIT by 9.6% in 12 months. This should ease concerns about debt repayment. Arguably, we learn the most about debt from the balance sheet. However, future earnings will determine ATOSS Software’s ability to maintain a healthy balance sheet more than anything else. So, if you want to know what the experts think, this free report on analyst profit forecasts might be of interest to you.
Finally, companies can pay off their debt only with cold cash, not with accounting profits. Although ATOSS Software has net cash on its balance sheet, it’s worth noting its ability to convert earnings before interest and taxes (EBIT) into free cash flow. Balance. Over the past three years, ATOSS Software has posted free cash flow equivalent to 83% of his EBIT. This is stronger than you would normally expect. This puts you in a very strong position to pay off your debt.
It’s always wise to look into company debt, but in this case ATOSS Software has €29 million in net cash and a decent balance sheet. Most importantly, he converted 83% of his EBIT into free cash flow, bringing in €25 million. Therefore, we do not consider the use of ATOSS Software’s debt to be risky. Stock prices tend to follow earnings per share over time, so if you are interested in ATOSS software, click here to see an interactive graph of historical earnings per share. is recommended.
After all, if you’re interested in a fast-growing company with a solid balance sheet, check out our list of net cash growth stocks right away.
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This article by Simply Wall St is general in nature. We provide comments based on historical data and analyst projections using only unbiased methodologies and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. We aim to deliver long-term focused analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Is not …