Is PFISTERER Holding (ETR:PFSE) A Risky Investment?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a 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. We note that PFISTERER Holding SE (ETR:PFSE) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.

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When Is Debt Dangerous?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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.

What Is PFISTERER Holding's Net Debt?

You can click the graphic below for the historical numbers, but it shows that PFISTERER Holding had €30.9m of debt in September 2025, down from €33.5m, one year before. However, it does have €73.9m in cash offsetting this, leading to net cash of €43.0m.

How Strong Is PFISTERER Holding's Balance Sheet?

We can see from the most recent balance sheet that PFISTERER Holding had liabilities of €127.0m falling due within a year, and liabilities of €36.9m due beyond that. Offsetting this, it had €73.9m in cash and €76.5m in receivables that were due within 12 months. So its liabilities total €13.4m more than the combination of its cash and short-term receivables.

Having regard to PFISTERER Holding's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the €1.38b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, PFISTERER Holding boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for PFISTERER Holding

Also positive, PFISTERER Holding grew its EBIT by 25% in the last year, and that should make it easier to pay down debt, going forward. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine PFISTERER Holding's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. PFISTERER Holding may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the last three years, PFISTERER Holding barely recorded positive free cash flow, in total. While many companies do operate at break-even, we prefer see substantial free cash flow, especially if a it already has dead.

Summing Up

While it is always sensible to look at a company's total liabilities, it is very reassuring that PFISTERER Holding has €43.0m in net cash. And we liked the look of last year's 25% year-on-year EBIT growth. So we are not troubled with PFISTERER Holding's debt use. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 1 warning sign for PFISTERER Holding that you should be aware of before investing here.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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 using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused 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.