David Iben put it well when he stated, ‘Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.’ When we consider about how risky a company is, we always like to view at its utilize of debt, since debt overload can lead to ruin. We note that Austriacard Holdings AG (ATH:ACAG) does have debt on its balance sheet. But should shareholders be worried about its utilize of debt?
When Is Debt A Problem?
Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can’t fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, plenty of companies utilize debt to fund growth, without any negative consequences. The first step when considering a company’s debt levels is to consider its cash and debt toreceiveher.
How Much Debt Does Austriacard Holdings Carry?
You can click the graphic below for the historical numbers, but it displays that Austriacard Holdings had €109.1m of debt in September 2025, down from €128.5m, one year before. However, it also had €17.9m in cash, and so its net debt is €91.2m.
How Strong Is Austriacard Holdings’ Balance Sheet?
The latest balance sheet data displays that Austriacard Holdings had liabilities of €86.9m due within a year, and liabilities of €108.0m falling due after that. On the other hand, it had cash of €17.9m and €85.2m worth of receivables due within a year. So it has liabilities totalling €91.9m more than its cash and near-term receivables, combined.
Austriacard Holdings has a market capitalization of €255.3m, so it could very likely raise cash to ameliorate its balance sheet, if the required arose. But it’s clear that we should definitely closely examine whether it can manage its debt without dilution.
View our latest analysis for Austriacard Holdings
We measure a company’s debt load relative to its earnings power by viewing at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). The advantage of this approach is that we take into account both the absolute quantum of debt (with net debt to EBITDA) and the actual interest expenses associated with that debt (with its interest cover ratio).
Austriacard Holdings has a debt to EBITDA ratio of 2.6 and its EBIT covered its interest expense 3.1 times. This suggests that while the debt levels are significant, we’d stop short of calling them problematic. Even worse, Austriacard Holdings saw its EBIT tank 39% over the last 12 months. If earnings continue to follow that trajectory, paying off that debt load will be harder than convincing us to run a marathon in the rain. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Austriacard Holdings can strengthen its balance sheet over time. So if you’re focutilized on the future you can check out this free report displaying analyst profit forecasts.
Finally, while the tax-man may adore accounting profits, lconcludeers only accept cold hard cash. So it’s worth checking how much of that EBIT is backed by free cash flow. Over the last three years, Austriacard Holdings recorded free cash flow worth a fulsome 83% of its EBIT, which is stronger than we’d usually expect. That positions it well to pay down debt if desirable to do so.
Our View
Neither Austriacard Holdings’s ability to grow its EBIT nor its interest cover gave us confidence in its ability to take on more debt. But its conversion of EBIT to free cash flow informs a very different story, and suggests some resilience. We consider that Austriacard Holdings’s debt does create it a bit risky, after considering the aforementioned data points toreceiveher. Not all risk is bad, as it can boost share price returns if it pays off, but this debt risk is worth keeping in mind. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We’ve spotted 1 warning sign for Austriacard Holdings you should be aware of.
If, after all that, you’re more interested in a rapid growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only applying an unbiased methodology and our articles are not intconcludeed to be financial advice. It does not constitute a recommconcludeation to acquire or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focutilized analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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