We believe Jungfraubahn Holding (VTX: JFN) has a good deal of debt
Legendary fund manager Li Lu (who Charlie Munger supported) once said, “The biggest risk in investing is not price volatility, but the possibility that you will suffer a permanent loss of capital. 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. Like many other companies Jungfraubahn Holding AG (VTX: JFN) uses debt. But should shareholders be concerned about its use of debt?
What risk does debt entail?
Generally speaking, debt only becomes a real problem when a company cannot repay it easily, either by raising capital or with its own cash flow. If things really go wrong, lenders can take over the business. However, a more common (but still costly) situation is where a company has to dilute its shareholders at a cheap share price just to get its debt under control. 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 analysis for Jungfraubahn Holding
What is the net debt of Jungfraubahn Holding?
You can click on the graph below for historical figures, but it shows that in June 2021, Jungfraubahn Holding had a debt of CHF 148.0 million, an increase from CHF 68.5 million, on a year. On the other hand, it has 8.74 million Swiss francs in cash, resulting in a net debt of around 139.3 million Swiss francs.
A look at the liabilities of Jungfraubahn Holding
The latest balance sheet data shows that Jungfraubahn Holding had debts of CHF 108.0 million maturing within one year, and debts of CHF 115.9 million maturing thereafter. In compensation for these obligations, he had cash of CHF 8.74 million as well as receivables valued at CHF 19.5 million within 12 months. It therefore has liabilities totaling 195.7 million francs more than its combined cash and short-term receivables.
Jungfraubahn Holding has a market capitalization of CHF 788.3 million, so it could most likely raise cash to improve its balance sheet, should the need arise. However, it is always worth taking a close look at your ability to repay your debt. There is no doubt that we learn the most about debt from the balance sheet. But it is future profits, more than anything, that will determine Jungfraubahn Holding’s ability to maintain a healthy balance sheet in the future. So if you are focused on the future you can check out this free report showing analysts’ earnings forecasts.
Over 12 months, Jungfraubahn Holding recorded a loss in EBIT and saw its turnover fall to CHF 126 million, a decrease of 28%. It makes us nervous, to say the least.
Not only has Jungfraubahn Holding’s turnover declined over the past twelve months, it has also produced negative earnings before interest and taxes (EBIT). To be precise, the EBIT loss amounted to CHF 9.5 million. Considering that besides the liabilities mentioned above, we are not convinced that the company should use so much debt. Quite frankly, we believe the record is far from up to par, although it could improve over time. However, it doesn’t help that he spent 90 million Swiss francs in cash in the past year. Suffice it to say that we consider the title very risky. When we look at a riskier business, we like to see how its profits (or losses) have changed over time. Today we bring readers this interactive graph showing the evolution of Jungfraubahn Holding’s profit, revenue and operating cash flow over the past few years.
At the end of the day, sometimes it’s easier to focus on businesses that don’t even need to go into debt. Readers can access a list of growth stocks with zero net debt 100% free, at present.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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