Health check: How prudently does Turisthotel dd (ZGSE: TUHO) use debt?
Howard Marks put it right when he said that, rather than worrying about stock price volatility, “the possibility of permanent loss is the risk that concerns me … and every investor I practice.” know worries ”. It is natural to consider a company’s balance sheet when considering how risky it is, as debt is often involved when a business collapses. Like many other companies Turisthotel DD (ZGSE: TUHO) uses debt. But should shareholders be concerned about its use of debt?
What risk does debt entail?
Debt helps a business until it struggles to pay it off, either with new capital or free cash flow. Ultimately, if the company cannot meet its legal debt repayment obligations, shareholders could walk away with nothing. However, a more common (but still costly) situation is where a company has to issue shares at bargain prices, constantly diluting shareholders, just to strengthen its balance sheet. By replacing dilution, however, debt can be a very good tool for companies that need capital to invest in growth 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.
See our latest review for Turisthotel dd
What is the debt of Turisthotel dd?
The graph below, which you can click for more details, shows that Turisthotel dd had a debt of 202.0 million kn as of March 2021; about the same as the year before. But he also has 251.7 million kn in cash to make up for that, which means he has $ 49.8 million in net cash.
How healthy is Turisthotel dd’s balance sheet?
We can see from the most recent balance sheet that Turisthotel dd had liabilities of KN 22.5 million maturing within one year, and liabilities of KN 189.8 million beyond. In return, he had 251.7 million kn in cash and 89.0 million kn in receivables due within 12 months. So he actually has 128.4 million Kn After liquid assets than total liabilities.
This short-term liquidity is a sign that Turisthotel dd could probably repay its debt with ease, as its balance sheet is far from tight. In short, the Turisthotel dd has a net cash flow, so it’s fair to say that it doesn’t have a heavy debt! The balance sheet is clearly the area to focus on when analyzing debt. But you cannot view the debt in total isolation; since Turisthotel dd will need income to repay this debt. So when you consider debt, it’s really worth looking at the profit trend. Click here for an interactive snapshot.
Last year Turisthotel dd suffered a loss before interest and taxes and actually reduced its income by 55% to 130 million kn. It makes us nervous, to say the least.
So what is the risk of Turisthotel dd?
While Turisthotel dd lost money on a profit before interest and tax (EBIT) level, it actually recorded a paper profit of 791k Kn. So when you consider that it has net cash, as well as statutory profit, the stock is probably not as risky as it sounds, at least in the short term. We will feel more comfortable with the stock once EBIT is positive, given the poor revenue growth. 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. For example, we discovered 4 warning signs for Turisthotel DD (1 cannot be ignored!) Which you should be aware of before investing here.
If, after all of this, you’re more interested in a fast-growing company with a rock-solid balance sheet, then take a quick look at our list of cash-growing stocks.
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