David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital. It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. Importantly, iGrandiViaggi S.p.A. (BIT:IGV) does carry debt. But is this debt a concern to shareholders?

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. If things get really bad, the lenders can take control of the business. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

Check out our latest analysis for iGrandiViaggi

What Is iGrandiViaggi's Net Debt?

The image below, which you can click on for greater detail, shows that iGrandiViaggi had debt of €6.89m at the end of July 2019, a reduction from €9.81m over a year. But it also has €30.5m in cash to offset that, meaning it has €23.6m net cash.

A Look At iGrandiViaggi's Liabilities

We can see from the most recent balance sheet that iGrandiViaggi had liabilities of €30.5m falling due within a year, and liabilities of €14.9m due beyond that. On the other hand, it had cash of €30.5m and €2.58m worth of receivables due within a year. So it has liabilities totalling €12.3m more than its cash and near-term receivables, combined.

Of course, iGrandiViaggi has a market capitalization of €68.8m, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. Despite its noteworthy liabilities, iGrandiViaggi boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if iGrandiViaggi can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Over 12 months, iGrandiViaggi reported revenue of €65m, which is a gain of 6.9%, although it did not report any earnings before interest and tax. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

So How Risky Is iGrandiViaggi?

While iGrandiViaggi lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow €962k. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. Until we see some positive EBIT, we're a bit cautious of the stock, not least because of the rather modest revenue growth. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how iGrandiViaggi's profit, revenue, and operating cashflow have changed over the last few years.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.